Chinese stocks drop most in 6 weeks ahead of Opening Ceremony of Olympic Games

Zhang Shidong and Dingmin Zhang of Bloomberg LP report Chinese stocks have plunged ahead of the Olympic Games due to what analysts and investors say was a failure on the part of the Chinese Government to announce "market stablalizing" measures ahead of the games.

A great deal can change in China in just a months time. Considering the last time I visited was back in Sept-Dec of 2006, I'm sure a great deal has evolved. One thing, no matter the time difference in which people visited China or more particularly Beijing that seemed to remain with time was hope that the games would boost Chinese equities.




This has been a good lesson to avoid heading into markets with the "herd" or in laymen terms... the masses.

Beijing definetly has a boom town feel, but so do other cities in China. Other places, such as Shaang Xi province, a coal producing region do not (or did not back in 2006). Chinese people from Southern Economic Zones created in the late 90's and other regions which have grown rapidly over the past decade expressed concern the country was spending too much on the games to me.

One young man of 20 years from Guang Zhou, a Cantonese speaking region ajacent to Hong Kong told me "Beijing has the boom but is only able to back it up becuase of the government. Places like Shanghai and Shenzhen are boom towns but can back the talk and boom."

He may be right, as Olympic spectators are dazzled in the capital, they are seeing quite a show... trust me it will be a show when the games opening ceremony comes on TV at 8am (Eastern Standard Time).

The boom feeling in China is real, but not substantial enough to defy slumping global equities. The Shanghai Stock Exchange has grown 7 fold in the past 2-3 years. With the global credit crises, there is no mystery as to why China and other boom markets like Vietnam and India are plunging.

This will be a good lesson to the thousands of investors picking stocks based off lucky numbers and the belief that their investments can only grow. US investors are still learning this despite being from a country with long established financial markets.

When I was born in the mid 80's, Stock Exchanges did not even exist in China. Now that they do, both independent and institutional investors in China must learn to ride the bad times. Learn how ot depend on an income flow from investments. Learn how to not hit or yell sell when things drop. Learn how to properly evaluate equities, instead of using lucky numbers of other ways to pick stocks.

The list goes on... in Chinese Bear Markets 101.