SHANGHAI, May 26 (SMM) --
Greece's Crisis Spreading into Other European Countries
Over the weekend, Spain's central bank took over a troubled regional savings bank, with exposure to Spain's real estate market. Although the bailed-out bank is small, with limited impact, many other banks are facing the same risk. The focus in the euro zone is now shifting from Greece's debt crisis to Spain's banking sector, and European sovereign countries are likely to face heavier debt burdens. Investors worried that Greece's debt crisis has spread into other European countries, and will further negatively affect the financial system. Such a concern depressed equities and commodity markets. SMM believes market confidence is very weak, and with exposure to the global economic recovery.
If Greece is Bear Stearns, which was a prelude to 2008 global financial crisis, markets are concerned that Spain will likely become the next "Lehman Brothers", which triggered the eruption of 2008 global economic recession.
Property Curbs Still Weigh on China's Financial Markets
China's harsh measures to control real estate markets are response for the rapid declines in domestic A-shares market and SHFE metals prices previously. Last weekend, sources reported China's National Development and Reform Commission (NDRC) said a property tax would not be implemented for three years, helping send domestic stock markets and metals prices surging on Monday. However, the NDRC yesterday denied this report and said a researcher's comments did not represent the agency's views, which to some extent depressed market optimistic prediction that China won't introduce a property tax in the short term. In addition, another report said the Ministry of Land and Resources plans to rule out new regulations to manage land strictly.
SMM believes China's economic growth will slow in the future as a result of China's measures to cool real estate market and tighten cash liquidity, as well as waning expectations of China's exports to the Europe due to the debt crisis in the Euro zone, and China's stock and metals markets will be negatively affected as well. Domestic A-shares and SHFE metals prices closed with decline on May 25th. Shanghai-Shenzhen 300 Index opened low and moved lower on May 25th, and finally closed at 2,813.94, down 2.07%, with the downward trend expected to remain unchanged in the short term.
Shanghai Metals Market May Double-Dip
Although LME copper, aluminum and zinc for delivery in three months rose significantly during the previously two days and long position sentiment picked up in the SHFE market, the US stock market violated widely again on May 25th and hit a new yearly low due to unchanged pessimistic expectation of market outlook from investors since fact that the spreading of the EU debt crisis may drag the global economy into a second round of recession and the uncertainties of the release of domestic regulation policies still haunted the market. The Dow Jones index fell below 10,000 points immediately after opening and slipped by 300 points to the most. The Dow Jones index fell by 3% or more and market was still largely dominated by short position sentiment despite that market stabilized to certain extent before closing. Meanwhile, CRB index was closed at 248.79 points, down 3.18 or down 1.26% yesterday. SMM believes that current market movement is still very sensitive to related market movement both at home and abroad as well as unfavorably geopolitical incidents. The continuous significant reduction of base metal positions indicated that long position power was not firm enough. Short position sentiment is still strong in the market in the short term, and SHFE metal market will continue to experience weak performance and may experience a double dip.
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