Even the Chinese are anxious about their surging stock markets. Officials at the Shanghai Stock Exchange are voicing concerns that their infrastructure cannot handle the rising volume and volatility.
A high-level government official has gone so far as to say that the market has developed a "bubble" and investors may be behaving "irrationally" The mainland stock market rose 130% last year. There are even stories about the Chinese borrowing against their homes to put money into stocks.
While a collapse in the Chinese markets could clearly do damage to the country’s economy, the fall-out would not be limited there. A number of stocks in Chinese-based companies trade on US exchanges. This list begins with several internet companies including Chinese search giant Baidu (BIDU), online media site Sina (SINA), Netease (NTES), Sohu (SOHU) and Tom Online (TOMO). Aside from US individual investors, institutions like Morgan Stanley, Fidelity, and Vanguard have money in these shares.
The same holds true for some of the large China telecom and financial firms. China Mobile (CHL) trades on the NYSE and currently has a market cap of over $191 billion. That’s much higher than Google’s (GOOG). China Netcom (CN) and China Unicom (CHU) also trade on the NYSE. China Life (LFC) is traded in the US.
A big China market collapse could burn investors outside the big Asian country and US investors will not be immune.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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