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June 24 2015

You’re probably familiar with the seven-year itch. Not the movie with Marilyn Monroe, but the concept that relationships can lose their luster after seven years.

That may be what happened last week in China. Investors got itchy and the Chinese stock market suffered its worst week since 2008. The Shanghai Composite lost more than 13 percent during the week, and the Shenzhen Composite was down 12.7 percent, according to MarketWatch. The previous Friday, the Shenzhen had closed at a record high.

Prior to last week’s correction, China’s stock markets had been VERY popular. So popular, Chinese firms were seeking to delist from American stock exchanges and relist their shares on Chinese exchanges, reported The Economist. Plus, the Chinese government rolled out the red carpet (and waived profitability requirements) for new firms seeking to list on local stock exchanges.

In their enthusiasm to participate in rising markets, some Chinese companies are reinventing themselves on paper. The Economist wrote:

“But the wider trend is clear. At least 80 listed Chinese firms changed names in the first five months of this year. A hotel group rebranded itself as a high-speed rail company, a fireworks maker as a peer-to-peer lender, and a ceramics specialist as a clean-energy group. Their reinventions as high-tech companies appear to have less to do with the gradual rebalancing of China’s economy than with the mania sweeping its stock market. The Shenzhen Composite Index, which is full of tech companies, has nearly tripled over the past year.”

June has been a tough month for China. Earlier in the month, MSCI decided not to add China’s A-shares, which are denominated in China’s renminbi, to its emerging markets index because of issues related to Chinese markets’ accessibility.

Greece hasn’t been faring all that well either. The European Central Bank extended an emergency $2 billion loan to the Greek government. The Greek people, anticipating Greece may not reach an agreement with its creditors, which could trigger default and an exit from the Euro, withdrew more than $1 billion from the country’s banking system in one day.

Sources:
http://www.huffingtonpost.com/jennifer-nagy/the-sevenyear-itch-fact-o_b_2443171.html
http://www.marketwatch.com/story/china-shares-fall-into-correction-territory-2015-06-19
http://www.economist.com/news/business/21654581-chinese-firms-listed-american-stock-exchanges-are-starting-go-home-red-tide-ebbs?fsrc=permar|text4
http://www.marketwatch.com/story/china-stocks-will-have-to-wait-to-join-big-msci-index-2015-06-09
http://www.npr.org/sections/thetwo-way/2015/06/20/415990263/greece-pledges-new-proposal-to-resolve-debt-crisis

  • Data as of 6/19/151- WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)0.0080.0250.0770.1580.1360.057
  • Dow Jones Global ex-U.S.-0.45-5.38.44.53.3
  • 10-year Treasury Note (Yield Only)2.3N/A2.61.63.24.1
  • Gold (per ounce) 1.70.4-6.9-9.5-0.811.1
  • Bloomberg Commodity Index-0.7-4.3-26.7-8.8-4.9-4.7
  • DJ Equity All REIT TR Index1.7-1.88.711.213.17.4

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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