Source: - http://www.iht.com/articles/2007/02/27/business/stocks.php


Chinese stock plunge sets off a worldwide sell-off
Investors fear economies are cooling

By Julia Werdigier and David Barboza
Published: February 27, 2007

LONDON: U.S. stocks plummeted Tuesday as concerns that the Chinese and American economies were cooling and fears that shares were overvalued sparked a global market decline.

At one point the Dow industrial average was down more than 546 points, or 4.3 percent, at 12,086, but it recovered some ground in the last 90 minutes of trading to close at 12,216.24, down 416.02 points, or 3.3 percent, the worst drop since Sept. 17, 2001. The Dow rose last week to both a closing and an intraday record.

The broader Standard & Poor's 500 index lost 50.33 points, or 3.5 percent, to close at 1,399.04, and the Nasdaq composite tumbled 96.65, or 3.9 percent, to finish at 2,407.87.

A 9 percent slide in Chinese stocks — coming one day after investors sent the Shanghai benchmark index to a record close — set the tone for U.S. trading. Major West European indexes were down by between 2 percent and 3 percent.

Investors said negative news on the U.S. economy had exacerbated the stock declines in America and Europe. The Commerce Department said Tuesday that durable goods orders at American factories fell 7.8 percent in January, more than double what analysts had expected, on average. The disappointing numbers also came a day after Alan Greenspan, the former chairman of the Federal Reserve, was quoted as saying there were signs the economy could be heading for a recession.

"It looks more and more like the economy is a slow-growth economy," Michael Strauss, chief economist at Commonfund, told The Associated Press, noting that investors were expecting the government on Wednesday to revise its estimate of fourth-quarter gross domestic product growth down to an annual rate of about 2.3 percent from an initial 3.5 percent. But some analysts said it remained unclear whether the global sell-off constituted a correction or a broader collapse.

"We believe this is just short-term and more of a challenge for those who are not yet in equities," said Thomas Körfgen, head of equities at SEB in Frankfurt. "I do not see a threat yet to the global market, as the fundamentals are positive."

Stephen Green, a senior economist and stock market analyst working in Shanghai for Standard Chartered Bank, agreed. "People are just on the edge," Green said. "It's very possible in two weeks we will be right back up there."

But analysts had cautioned for months that the markets in China, which soared almost nonstop for more than a year, appeared vulnerable.

Some investors say the drop was triggered by concern that the Chinese government would clamp down on illegal share offerings, which were among the type of investments responsible for the market's recent record increases.

The possibility of tighter investment controls in China also scared investors in companies that get a large proportion of their sales from there. With China being the world's biggest user of metals, mining stocks like BHP Billiton and Rio Tinto Group were among those most affected.

"Risk assets have been pushed so far in one direction that there had to be a pullback," said Andrew Lapthorne of Dresdner Kleinwort in London.

The benchmark Shanghai composite index, which passed the 3,000-point milestone Monday after the weeklong Chinese New year holiday, lost 268 points, or 8.8 percent, to close at 2,771.79. The Shenzhen composite index fell 66.31 points, or 8.5 percent, to 709.81.

But some analysts said China's market sell-off was not necessarily indicative of the country's economy, where growth continues to be strong.

In Europe, the DAX in Frankfurt and CAC 40 in Paris both fell about 3 percent, while the FTSE in London lost 2.3 percent. Emerging markets, some of which had also risen to records this year, tumbled as investors became skeptical that the good times would continue.

After rising 20 percent in 12 months and reaching a record last week, Morgan Stanley Capital International's emerging markets index fell 1.7 percent to 924.64 points in London. Stocks in Russia and South Africa also fell from record highs, and the Turkish stock market had its biggest decline since June.

David Barboza reported from Shanghai.

And over-stressed financial system or just a long due market correction?

Time to buy? Especially big blue chips that went down.

Post-Crash stock buys from this in Forbes:

GENZ, IDTI, ORCL, SBUX

Found this about some simple things to remember:

Survive a Market Drop -- and Make It Work for You
Tuesday, February 27, 2007 provided byCNNMoney.com

Losing money never feels good. But keep things in perspective and you can boost long-term returns.

It takes nerves of steel to shake off a stock drop like the one that came Tuesday - even conservative index-fund investors are more than 3 percent poorer.

They know sell-offs are common, perfectly normal (see table), and even healthy. When stocks go way up in a hurry, their prices become unrealistically high. Only by falling occasionally (and even sharply) in the short run can stocks continue to rise in the long run - without the agony of today's drop, the ecstasy of tomorrow's good returns becomes impossible.

Consider the terrible slide of 1973-74, when the S&P 500 index lost 48 percent of its value. Richard Nixon had resigned the Presidency, oil prices had quadrupled, Cleveland and New York City were on the verge of bankruptcy, and inflation had flared up to 12 percent.

If ever there's been a good time to panic, that had to be it. But as the old saying goes, things are darkest before the dawn. If you'd sold out of stocks at the end of 1974, you would have missed 1975's 37.2 percent return and 1976's 23.8 percent gain - two very strong years for the stock market.

In fact, there's such a thing as paying too much attention to your money. In the late 1980s, Paul Andreassen, a psychologist then at Harvard University, conducted a series of laboratory experiments to determine how investors respond to financial news.

He found that people who pay close attention to news updates actually earn lower returns than people who seldom follow the news.

When you think about this a little more, it actually makes good sense. News coverage tends to make market movements seem even bigger than they are - and to make them seem likely to persist just when they are most likely to reverse.

Take action Fortunately, there are several simple and effective steps you can take to turn a stock market crash to your advantage.

Amp up your 401(k). Since a down market can be a great time to buy solid investments at bargain prices, contribute as much to your 401(k) as you can, because you'll be picking up more shares for the money, which will pay off when the market rebounds.

If you can't contribute the maximum your plan allows, at the very least contribute as much as is required to receive the company match. Typically, companies match 50 cents on every dollar you contribute, up to 6 percent of your compensation.

That means for each dollar you invest up to 6 percent, your employer adds another 50 cents, instantly transforming your investment into $1.50. This will not only help cushion any fall in stock prices, but it will amplify your gains once the market recovers.

Adjust your risk. A market sell-off is a good time for a gut check. Did the mutual funds you own take too much risk and fall much more than their respective indexes?

Obviously you would have wished you'd known before this decline. But at least you'll know which funds you want to ride into the next one. For a good selection of mutual funds with good risk profiles, see the Money 70, Money Magazine's selection of best funds.

Determine your deadlines. Ask yourself when you will need the money you've invested. For example, if you have a newborn child, it's a good idea to invest some money to pay college tuition down the road - and you can put most of it in stocks, since 18 years should be long enough for the market to recover from a crash.

But if you're about to make a down payment on your dream house, that money should go in a safer bucket, where a stock market crash can't hurt it; there, you want to hold mainly cash and bonds. Tuesday's drop was relatively small and you can still make those adjustments.

Spread your bets. If all you owned was U.S. stocks or stock funds, the crash has just reminded you that being diversified is the best offensive - and defensive - weapon in any investor's arsenal. Even if you're young and like to take risks, you should have some cash, some bonds, and some foreign stocks, which, over the long run, will combine with your U.S. stocks to lower your risks without crimping your returns.

"billions of bilions of blue blistering barnacles"

"ten thousand thundering typhoons"

Last one for the night: Shanghai Composite up 1.25% in early trading.

Good luck and good nite to all those invested - it's going to be an interesting day tomorrow.

Working late Captain? It's already 9pm in our neck of the woods ... :-)

:(:(:(

Thank goodness..i sold 2 of my shareholdings and made a profit of NRs 20,000 for the first time in this worldwide sell-off frenzy. I hope this slump in stockmarkets won't last long.

Asia share markets are working hard in face of U.S.market decline and continued jitters about China - falls don't look convincing and markets are off lows; Shanghai Composite Index in fact is now +1.3%. Most falls mirror size of decline on Wall Street which suggests move will soon have run course: Australian shares off 2.4%, Nikkei off 3.6%, STI 4.6%, HSI 3.2%, Kospi 4.2%; KLCI off 4.1% after large early fall which came in part on China parallels (hot money has been flowing into both countries to bet on currency rise). HK blue chip opened sharply lower following plunges on global markets
triggered by Chinese markets on slew of negative rumours. The Hang Seng index opened down 720 points at 19,426 (Dowjones)

let it drop few more and start buying stocks of good companys ie that has positive earnings. Do not panic in this stock market crash .. you can make good return.

See the value line report and try to find the company that is losing money or in bottom line for last several years. They will go up in next few years ( so called momentum effect).
If you need some advice on chosing the stocks following are my suggestions.
Look for following numbers. BETA < 2. PEG ratio <2.. Low dividend payout ratio (compared to competitiors) ... But compnay that is paying some dividend.
May be this will help you guys

This is not just a ripple of Chinese plummet; there seems to be some technical glitch as well. Anyway, good for some and bad for others.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aUY6sWUjwBMw&refer=us

World Markets Plunge for Second Day
Wednesday February 28, 1:44 am ET
Source:yahoo finance

TOKYO (AP) -- Stock markets plunged across much of Asia for a second day Wednesday amid jitters about a sell-off in China's stock market and a worries about a possible slowdown in the Chinese and U.S. economies.

Shares in Tokyo, Hong Kong, Singapore, Malaysia, Australia, New Zealand, the Philippines and Indonesia all tumbled more than 3 percent in morning trading, following dismal overnight losses on Wall Street, the worst since the Sept. 11, 2001, terrorist attacks.

In China, stock modestly recovered from their 9 percent plunge Tuesday -- their biggest drop in a decade. The Shanghai Composite Index was up 1.2 percent to 2,804.28.

But investors in other Asian markets dumped shares Wednesday, with Japan's Nikkei 225 stock index down 644.85 points, or 3.56 percent, to 17,475.07 points at the close of the morning session.

Hong Kong's Hang Seng Index was down 3.8 percent, while Australia's benchmark S&P/ASX200 index shed 3.5 percent. Indonesian shares lost 5.2 percent, while Philippine stocks plunged 9.4 percent.

The trouble began Tuesday -- just one day after Chinese stocks hit a record -- as investors unloaded shares to lock in profits amid speculation about a fresh round of austerity measures from Beijing to slow the nation's sizzling economy.

The Shanghai Composite Index tumbled 8.8 percent, its largest decline since Feb. 18, 1997. In New York, the Dow Jones Industrial Average slid 416 points, or 3.3 percent, to 12,216.24. Main European indexes fell about 3 percent.

Investors were also spooked by comments Monday from former U.S. Federal Reserve Chairman Alan Greenspan, who said a recession in the U.S. was "possible" later this year.

On Wednesday, Australian Treasurer Peter Costello predicted the plunge in China's share market would trigger "volatility on equity markets for some time."

But his overall assessment of China's economy was positive, telling reporters the Asian giant would continue to grow, albeit "in fits and starts."

Japan's Chief Cabinet Secretary Yasuhisa Shiozaki tried to quell concerns about the Tokyo market saying the overall fundamentals in Japan were still strong.

"On a broad perspective the corporate sector continues to perform well," Shiozaki said. "A long-term economic recovery is continuing."

Some regional brokers said they saw an element of panic selling among retail investors but that more experienced investors were sitting it out. Other market players were on the look out for bargain hunters to emerge later in the session.

Australian brokers said they were confident the fall was a correction, not the start of a bear market.

"I'd put a number of say 3-5 percent on it today," said AMP chief economist Shane Oliver, adding that the drops could extend to 10 percent in the next few weeks. "I don't see it having major economic implications and therefore I'm pretty confident it's just a correction."

just shows how much impact china can have on the world market...

I don't know china impact but I'm bying sbux if it drops below $28.

This was bound to happen. China's economy is sooo inflated right now. And because of their closed door policy, we cannot exactly gage what their REAL value is. I would not be surprised if this make sthe US economy to slide into Recession again. 400 points is a lot.

Room for cautious optimism ?

U.S. stocks stable as Europe and Asia continue decline

Stock markets fell sharply across most of Asia again and continued to decline in Europe after Tuesday's global dive. Stocks in New York showed some tentative signs of recovery.


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Duh? What's the big deal?

Unworriedinvestors are buying again in Shanghai

SHANGHAI: Seated before a row of computer terminals flickering with stock charts in a large brokerage house in this bustling city's downtown area, Li Ruichang insists he is not too worried about China's massive stock sell-off Tuesday.

"Things like that happen," Li, a 63- year-old engineer, said Wednesday. "But I'm not worried about a crash. After a five-year long bear market, the bull market shouldn't end that fast."

Li is a speculator. The Chinese stock market, he says, is like a casino or perhaps even a government-rigged slot machine. But you can still make money betting on the market here.

###########################################

Full-blownU.S. recession is still seen as unlikely

Excerpt:

The economic news certainly isn't all bad. The housing problems still haven't turned into a crisis, thanks in part to interest rates that are still not high by historical standards. So the most likely situation is not a full-blown recession.

The forecasters at the Economic Cycle Research Institute in New York, who have accurately predicted each of the last three U.S. recessions, argue that the current slowdown won't amount to much more than a lull. By the middle of the year, they say, low interest rates and healthy corporate spending will have the economy growing nicely once again.

Lakshman Achuthan, the institute's managing director, said Tuesday that he thought the odds of a recession over the next year were less than 20 percent. Shepherdson, the chief U.S. economist at High Frequency Economics, who's more bearish than most forecasters right now, still puts the odds at only 30 percent.

But for all the attention that formal recessions get on Wall Street, they are not really the benchmark that matter to most people.

A significant slowdown that falls short of a recession can do a lot of damage to stock prices, profits and wages. Only in the last few months, for example, has the current expansion grown strong enough to give most American workers pay raises that outpace inflation. Those raises would be endangered if the economy were to slow from last year's growth rate of 3.4 percent to even 2 percent.

Found this interesting graphic depicting yesterday's events:

The street is on a bit of a roll this morning.

Check this out on Forbes - talks about some more value buys:

Buying the China syndrome : http://www.forbes.com/home/personalfinance/2007/02/27/china-bidu-shanghai-pf-ii-in_jd_0228newsletterwatch_inl.html

I think it is a sign of how the world has changed..the old saying "when America sneezes, Europe catches cold" isn't true anymore..Chinese stock market which barely existed 10 years ago did this ..wow..

Of course this would be a good oppertunity to cash in yer chips. Cause that value is going to to up again. This is a minor setback, China economy will only go up from here on. So this buy back are the ones trying to cash-in on this minor setback. Europe, The Americas, and the rest of the world cannot get enough of them CHEAP CHINESE PRODUCTS their stake in the world market will keep going up till it hit a plateau like the Japnese economy did in the late 80's to early 90's(they still have not fully recoved from that slump).