lnp3 at panix.com
Tue Feb 27 13:40:38 MST 2007
NY Times, February 28, 2007
Wall Street Plummets After Chinese Stocks Take a Big Hit
By JEREMY W. PETERS and DAVID BARBOZA
Stocks retreated sharply Tuesday after a sell-off in China rattled markets
worldwide and data on durable goods orders came in well below expectations.
After reaching record highs on Monday, Chinas stock markets reversed
course drastically on Tuesday, plummeting in one of the biggest sell-offs
in their history.
Analysts said there was no single reason for the plunge, but many have
cautioned for months that the countrys volatile, roller-coaster market,
which has been soaring almost nonstop for more than a year, appeared
The plunge in Chinese stocks had global reverberations. Stocks fell across
Europe, with the major indexes in France, Germany and Britain all dropping
more than 2 percent. In the United States, trading got off to a bad start
and stayed that way. At midday, the Dow Jones industrial average was down
more than 170 points, or about 1.4 percent. The broader Standard and Poors
500-stock index fell about 1.5 percent, and the Nasdaq composite was off
more than 2 percent.
The benchmark Shanghai Composite index, which had passed the 3,000
milestone on Monday after the weeklong Chinese New Year holiday, shed 268
points, or 8.8 percent, to close at 2,771.79
The smaller Shenzhen Component index fell even further, dropping 797.87
points, or 9.3 percent, to 7,790.82.
Share prices also tumbled elsewhere in Asia, although not nearly as much.
Hong Kongs benchmark Hang Seng index dropped 412.94 points, or 1.8
percent, to 20,095.01. In Japan, the Nikkei fell 95.43 points, or 0.5 percent.
The wave of selling then spread to Europe, and later to the United States,
where a government report showed that orders of durable goods big-ticket
items that include washing machines, airplanes and semiconductors
declined more than expected in January. That hastened the sell-off on Wall
Chinese share prices have swung wildly in recent months, rising on huge
interest from largely inexperienced retail investors in soaring stock
prices, then falling on stern Chinese government warnings about blind
optimism in the market.
The unmistakable trend, however, has been up. Share prices on the major
Chinese indexes climbed more than 100 percent last year, ending a five-year
It is too early to tell whether the decline today constitutes a healthy
correction in China or the opening act of a broader collapse.
Some analysts said that rumors about new taxes on capital gains spooked
some investors. Particularly hard hit were more liquid, big-cap stocks,
which weigh heavily on stock indexes.
Its obvious that a large amount money was being pulled out of the market
from big-cap stocks, said Wu Jianxiong, an investment strategist at Guotai
Junan Securities in Shanghai.
Stephen Green, a senior economist and stock market analyst working in
Shanghai for Standard Chartered Bank, said the market fundamentals had not
changed drastically in recent weeks, adding that the stock markets in China
tended to be volatile, particularly after reaching all-time highs.
People are just on edge, he said. Its very possible in two weeks well
be right back up there.
More information about the Marxism