BRIC Illusion from Stimulus

BRIC business

We have to remember that a portion of the Chinese stimulus is being funneled into both stock market and real estate speculation... in fact the powers that be have gone ahead and quantified how much they believe it is. I'd argue the same is being done in the US at least towards the stock market but unlike the Chinese who admit it, the secretative government of the US won't. Always a hoot when the Chinese are more transparent than the US.... wait, wasn't that an election theme? Transparency? Contrast "Chinese Government Economists" with "US Government Economists" who are fighting even an having an audit done on their all powerful entity.

Chinese new bank loans worth about an estimated 1.16 trillion yuan ($170 billion) were invested in the stock market in the first five months of this year, China Business News reported, citing a government economist.

That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council.

“Where did it go? It’s undeniable that a portion of the lending may have flowed into stock and real estate markets and triggered the rebound in these two markets,” the former official said at a financial forum in Ningbo city in eastern China.

2 months ago (May 20, 2009: Year to Date Returns by Country - Go Peru!) the order was Russia, India, China, and Brazil - thankfully "stimulus" can work in many ways i.e. pushing stock markets ever upward.

China's Shanghai Composite is currently up 81%, down days in recent months have been few and far between. Even though rest of the BRIC (Brazil, Russia, India, China) countries have posted big gains year to date, China has broken away from the pack. Overbought has become the new norm for the Chinese equity market, and anyone that has bet on a pullback has gotten absolutely crushed. Remember, however, that the sharper the increase usually means the sharper the fall, so when a correction does finally come, watch out.

Anything to create the mirage of prosperity going, it'll be interesting to see what happens when the correction mauls the Chinese and other stimulus whores.

BRIC business