Friday 29 May 2015

Shenzhen Stock Market = 175% growth

The global financial markets are still awaiting a bounce back from the global financial crises. A stock market from the city which you might have not heard is making miracles. The Shenzhen stock market in China has rallied over 175% in last few months. The Shenzhen Composite index is up by 100% of a year to date basis. The other counterpart India recently elected its new decisive leader Narendra Modi. Indian Stock Index like BSE Sensex has grown by just 13% in 2014. No where in the world, stock markets see 100% plus increase, its crazy. Shanghai Stock Exchange has also seen phenomenal growth rate. It is up by 140% since May 2014.

Out of 17000 listings, less than 10 are running in yearly negative. If you compare Shenzhen and Shanghai with New York, this how the charts look like.

There is so much interest in the investors that BNP Paribas estimates that 170000 new trading accounts are opened every day. Markets in China have spiked this year even after the economy is poised to grow at 7% which is the lowest after 2008. Investors are confident that Beijing will turn things around. The Central Bank has cut the rates consistently. Economists expect to ease more things in coming months.

103 stocks stocks in Shenzhen Composite reported 300% plus earnings, while the average market capitalization has increased to $3.5 billion says Bloomberg.

Best Performing Companies in Shenzhen Stock Exchange 

Beijing Baofeng Technology Ltd recorded growth of 3821%
1800% growth in 52 weeks 

A 3000% increase in stock also means volatility. BBC reported that a Chinese millionaire lost $15 billion in one hour. These stock exchange can make fortunes and destroy fortune. A stock market which doesn't give a shit about global slowdown, EU/Fed Decision, Oil prices, slowing China IIP Data might be unfair and speculative. A 500% growth stock market, yet unheard by world. The stock bubble will bust soon.

By - Chaitanya Kulkarni
Twitter - @chai2kul

Thursday 14 May 2015

Fault lines - Ecuador in Trouble

Ecuador is known for its oil, coffee, bananas, flower. Mostly known for the liquid gold - Oil. Ecuador's economy is the eight largest in Latin America and experienced the growth rate of 4.5% in the last decade. The unemployment rate has dramatically decreased to 17% from 40% in a decade. Oil was first discovered in 1960s and the proven estimate of crude under the land is around 6.51 billion barrels. Oil accounts for 40% of  Ecuador's export and contributes for the positive trade balance. But things have become complicated since the oil fall. Oil has reached $60 per barrel and this is leading Ecuador towards systematic risk.

After the Banking crisis in 1999, the central bank decided to adopt US Dollar as Ecuador's official currency. The rise in the valuation of USD is hurting the economy too. According to rating agency Standards & Poor's, Ecuador's budget deficit stands at 4.7% and some economists say that it may reach as high as 7%.

Large Public Spending

The newly built Quito International Airport
The oil dependency has helped President Correa to spend on massive public infrastructure. A gleaming new airport, four lane highways, BRTS systems, Metro and rising skyscrapers makes Correa one of the most loved leader in Latin America. Most of its public spending comes from oil hungry nations like China and the United States. Ecuador has borrowed $11 billion from China since 2008 in return of a guaranteed assurance of 90% of its oil export to China. 

China has become Ecuador's second largest oil investor with large investment in oil refineries and mining projects.  But we need to understand that China's economy is in trouble too over excessive public debt. A weaker China means trouble for Ecuador's economy. Ecuadorean citizens seem happy with President Correa for the new public infrastructure but weaker oil, China's fall and the rise in USD puts the economy in the dangerous spot. How long does Ecuador's good times times last? Well it all depends on oil. The future of Ecuador seems uncertain.

By - Chaitanya Kulkarni

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