THE CHART OF THE DAY
5 June 2009 by Cullen Roche
1 Comment
You might be surprised to hear that the best performing major stock market this year is Russia – I know I am since my long shot prediction for 2009 was a major Russian financial crisis. The Russian stock market is up over 130% from its bottom. If you’re looking for the ultimate reflation trade you’ve found it in Russia. With a volatile economy that is highly levered to the price of oil you have all the ingredients of a high risk high beta reflation trade. But don’t get too excited – these high beta names give new meaning to the old saying, “what goes up must come down”…..
Sound familiar to the Chinese stock market. Lately if you read Chinese publication in Chinese, you would see that that Chinese banks have been lending money out at the historically high speed and amount in the first half of 2009, mostly to individual borrowers. No wonder the stock and real estate markets have been rising high and fast over there.
Official economic statistics do not explain themselves, e.g. GDP growth vs. electricity consumption. In a row of many months, the GDP was reported 6% growth while electricity consumption by domestic and industrial uses was shrinking by 7%. More thoughtful Chinese challenged the inconsistency between these two numbers. Then the government promised to “reconcile” the two numbers next time.