Chinese stocks fall again

Chinese stocks tumbled again on Wednesday. AFP/CNA reports:

Chinese shares tumbled 4.30 percent on Wednesday as resources companies plunged amid concerns over declining international commodity prices, dealers said.

The Shanghai Composite Index, which covers A and B shares, was down 125.30 points at 2,785.58 on turnover of 122.3 billion yuan (17.9 billion US dollars)...

The index is now 20 percent off this year's highest intraday level of 3,478.01, which it hit on August 4, but has nevertheless gained about 53 percent since the start of 2009.

This time, however, stock markets in Europe and the US managed to hold out well, the latter even managing a gain. From Bloomberg:

U.S. stocks rose for a second day as energy shares climbed on a rebound in oil and Merck & Co. led drugmakers higher after a judge upheld a patent, helping the market erase an early drop triggered by a slide in China shares...

The Standard & Poor’s 500 Index increased 0.7 percent to 996.46 at 4:10 p.m. in New York. The Dow jumped 61.22 points, or 0.7 percent, to 9,279.16. Two stocks rose for each that fell on the New York Stock Exchange. Some 7.9 billion shares changed hands on all U.S. exchanges, 16 percent below the three-month daily average...

The Dow Jones Stoxx 600 Index of European shares retreated 0.3 percent today. A 43 percent rebound since March 9 has driven the regional measure’s valuation to about 40 times the profits of its companies, near the most expensive level since 2003, data compiled by Bloomberg show.

Merrill Lynch thinks that the China stock market will also rebound. Again from Bloomberg:

China’s stocks are set to rebound from this month’s plunge on prospects earnings will beat estimates and policy makers will maintain bank lending, Bank of America Corp.’s Merrill Lynch unit said...

“I don’t think this is a turning point,” David Cui, China strategist at Merrill Lynch, said in a phone interview yesterday. “My sense is that earnings will surprise on the upside and we’ll see a round of earnings upgrades. The government’s monetary policy also hasn’t changed.”

Cui’s view is shared by U.S. fund managers Uri Landesman of ING Investment Management Inc. and Sentinel Asset Management’s Kate Schapiro, who say the stock selloff won’t prompt them to cut their investments in the world’s third-largest economy.