Monday, July 31, 2006

The Sound of Breaking China?

Props to Bloomberg for the chart. We're looking at three months' worth of China's Shanghai (Shenzhen Composite Index) market, and we're looking at multiweek lows.

That, in itself, might not be newsworthy, other than the fact that economists in China are now joining the call for a stronger Yuan. The Yuan has hit its highest level relative to the dollar, a development reportedly supported by the U.S. Treasury Secretary. New IPOs are weighing on the Shanghai market and liquidity concerns abound. So far, China's command economy has not done a good job of obeying commands; the recent response of Shanghai stocks to Yuan strength suggests that, for better or for worse, markets may at last be listening.