Chinese Stock Market Slump Shakes the World Stock Markets

Over the past four years, United States stock markets have recovered very strongly. Chinese emerging economy and stock markets have played a major role in the world markets. China main stock index has doubled in value in the past year making China one of the major players in the world stock markets and the world economy as a whole. Chinese recent economic slump has worried the entire globe and has triggered stock prices to fall tragically in China, India, Europe, Australia and in the United States. Chinese stocks plunged nearly 9 percent on Tuesday.


What is going on?
The question facing many investors and some of us is how far and how long the fall in prices will last. What went wrong in Chinese stock markets is now affecting the world stock markets.


The markets were surprised by the speed and size of recent declines.

According to BBC "Markets across Europe and Asia remained deep in the red, triggered by 9% losses in Shanghai the previous day"

Markets in Asia, Australia and India have suffered substantial losses. What went wrong? Who is getting affected? Is the world market safe enough? Will the world stock markets recover?

The Chinese stock markets shake up/meltdown was caused by rumours of Chinese
government cracking down on illegal share offerings and trading, as well as fears about accelerating inflation.

Political factors also weighed on the market movements with speculation about government plans for tax reform and rural expenditure. Even though, China's economy has been doing great we must remember that "Even if a market's upwards trend is not broken, a market correction can still be significant" analysts said.

"Turnover in Shanghai shares ballooned to an all-time high of 128 billion yuan ($16.5 billion), nearly a fifth higher than the previous daily record of 107.8 billion yuan set in January.
The market was hit by several negative rumors in late trade, including talk that authorities would take strong steps to cool speculative activity" Chinese economy has been growing so fast to make most economists worry.Visit money.cnn.com/2007/02/27/news/international/bc.markets.china.stocks.close.reut/index.htm?postversion=2007022709 for more information.

What happens in Chinese stock markets has impact in all over the world. This is the proof that the world stock market is so interconnected and very Volatile. Investors are now so worried.
The second day in a row US stock markets continue to worry investors "Overnight, shares on Wall Street closed in the red, with the key US Dow Jones and S&P 500 indexes falling 0.3%, while the NASDAQ lost 0.5%. " visit http://news.bbc.co.uk/2/hi/business/6410629.stm for more info.

Other than Chinese market meltdown, in the United States of America there are some other factors that have triggered fall in the stock market prices such as the Tuesday computer glitch: "Tuesday's market meltdown was triggered by a sharp fall in Chinese shares and signs of economic weakness. A computer glitch also impacted the reporting of the Dow Jones industrial average, making the big decline in the United States appear even more dramatic". This is according to CNN.

Well, here we go again. Technology can cause big trouble in the matter of seconds. We have been so reliant to technology as you can tell; the world economy also relies on technology. A small glitch can cause a big loss of money.

"Around 2:00 pm today the market's extraordinarily heavy trading volume caused a delay in the Dow Jones data systems and as a result, the calculation of the Dow Jones Industrial Average temporarily lagged behind the market decline and as we identified the problem we decided to switch over to a back-up system and the result was a rapid catch-up in the published value of the Dow Jones Industrial Average," explained a Dow Jones spokeswoman. Thanks God I don't work for Dow Jones because someone from the IT department has to explain this.

Will the world stock markets recover? Yes. The stock markets is recovering and it will continue to recover. " Gains are modest, with Dow finishing up about 50 points; Fed chief Bernanke helps reassure investors; bonds, global markets struggle" http://money.cnn.com/2007/02/28/markets/markets_0445/index.htm?cnn=yes

I think this is the right time to buy overpriced stocks but the question is how long will stock prices continue to fall? Stocks can be good investment but can also turn into a big loss in seconds when the market shakes. Although it is risky buying the over priced stocks before the stocks slump, it can be another way of dealing stocks at this time. Is this the safe way especially when everyone feels the impact of what is going on in the stock markets? I don't know.

Is Tanzania being affected by the world stock markets slide? How? This is another hard homework especially when Dar es Salaam Stock Exchange is not automated and has very few local and foreign companies listed. For instance on March 1, 2007 only four companies were listed in Dar es Salaam Stock Exchange; SIMBA, SWISSPORT,TBL and TWIGA. Tanzanian stock markets can be safe in some ways but if the major investors are suffering in their home countries, Tanzanian economy will also suffer in some way. When the world stock markets suffer, it is hard to tell how Tanzania stock market is doing. Unlike US stock markets, Tanzanian companies and stock markets are not transnational and therefore seem not connected to the world market share.

The matter of the fact is China, United States of America, Europe and other transnational corporations have invested heavily in all over the world and therefore African continent which makes me believe that when Chinese economy shakes, USA feels the impact so do Africa and other parts of the world markets.