Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Overnight, the Chinese markets surged after being comatose for months. Some are saying it is due to comments from the new government which are leading to expectations for further intervention; others are pointing to a rule change limiting how much insurance companies can invest in banks. The “why” doesn’t really matter but the “what”.
Chinese stocks jumped after analysts interpreted a report by Communist Party’s Politburo as signaling wider government support for the economy. The Politburo, in its first assessment of the economy under new leader Xi Jinping, said yesterday that China will keep macroeconomic policies stable. Separately, the country’s insurance regulatory commission said in a statement yesterday it abolished a rule limiting how much insurance companies can invest in commercial banks.
The chart below doesn’t reflect the overnight prices but there was a 2.9% gain to 2032. This is the largest gain since September 7th. As an aside if you are a Tom DeMark fan he made a call to buy China early this week per his signals, saying a nearly 50% advance was to come in the next 9 months. As I keep saying, China was the ultimate driver of the 2009 global economy bounce and the main question now is what to do they do in 2013 even as the country is facing loads of bad debt from bad investments during their extensive 2009 stimulus (23% of GDP).
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
