For now US index futures are pointing slightly higher, but let’s hope that the Shanghai Composite is not the leading indicator everyone is making it out to be.
It fell 4.1% last night, and is now at 2739. 3000 is a distant memory.
Things started a bit down, but really deteriorated as the session wore on, as the chart below from Bloomberg makes clear.
So what’s going on?
One possible culprit is the government’s ongoing effort to fight its real estate bubble.
This hit the wires last night:
China Tightens Use Of Revenue From Property Pre-Sales – Report Last update: 5/5/2010 9:58:47 PM SHANGHAI (Dow Jones)–In its latest property market tightening measure, the government has stopped developers from using revenue from a property project’s pre-sales before the development’s completion, the state-run China Securities Journal said Thursday, citing unnamed sources. Previously, developers were allowed to use revenue from pre-sales of uncompleted projects to invest in other projects.
This is, of course, just the latest move by the government. Most recently it instituted a one apartment for family rule, and of course it’s been steadily upping reserve requirements at banks, in hopes of establishing more prudent lending.