Ok, so Vietnam is not on your list of countries that you watch on a daily basis – we do. The big news today is not the Citi (C) debacle but what is happening in Asia—there were big breakdowns in the TRADE lines in the equity markets of Vietnam, China and Hong Kong.
Last night Vietnam was down 1.6% and is now down 30.5% over the past month. That is a stock market CRASH! Also last night, Hong Kong broke its TREND line of 21,557, declining 1.2%. The next question is, why? We see the reason being China. Not only did the Shanghai A-Shares get smoked last night trading down 2.3%, but also broke its TRADE line, an important momentum line that has not been violated in quite some time.
We continue to make the call that China is going to slow down from an economic data point perspective in 1Q10. It should also be on your radar screen that we’ve seen a big divergence in the property stocks in China, which have underperformed the local index by nearly 1000 bps. Our take-away from this is that the property bubble appears to be popping in China, just like the financial “bubble” is popping here in the US. The XLF has underperformed the S&P 500 by 990 bps over the past three months.
We continue to harp on the fact that China is going to restrict loan growth in the property sector because of “bubble” fears.
With the Japanese market declining for the past three months, there is not much in Asia that looks positive right now.
Keith R. McCullough
Chief Executive Officer