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Two Ways To Play: Banking News Sends China's Stocks Tumbling


Strengthen your portfolio in good times and bad.

China Takes a Tumble

Chinese stocks took a tumble last night after the country's banking authority said lenders who don't meet their reserve requirements could be punished by limiting their market access.

In a story by Dow Jones, the China Banking Regulatory Commission said capital adequacy requirements will now be at 10%, up from 8% last year. There's speculation that the agency could raise the requirement up to 13% by the end of 2010, but the CBRC denied these claims.

Nonetheless, the move is the latest sign that China is becoming increasingly worried about risks building in the country's financial sector after this year's lending spree. China's stock market had a broad-based selloff with the Shanghai Composite falling 3.45% and Hong Kong's Hang Seng fell 1.5%.

From the Bull Pen: Investors with a longer time frame are encouraged by dips such as these. Consider a play by Professor David Dispennette mentioned last week on the Buzz, China Green Agriculture (CGA). A sell stop can be set around $14.50 to $15.

From the Bear Cave: If this is the start of an intermediate-term correction, keep an eye on China Life Insurance (LFC). But patience is key. Watch for more follow-through on the downside and the stock breaking its 20-DMA (currently $73.50). If and when.

A Quick Check around the World

Asian trading closed with the Nikkei -1.01%, India -0.29%, Hang Seng -1.53%, Shanghai -3.45%, and Taiwan 0.36%.

Across the pond, we see the FTSE 0.15%, CAC -0.18%, DAX -0.08%

As of 8:20 AM EST, S&P Futures are trading +2.00 to 1105.75. Nasdaq futures are +1.000 to 1792.50.

A Look at Commodities

Over in commodities, crude oil is -0.06 to 77.50 while gold is +5.400 to 1170.10 this morning. Silver is +0.30 to 1864.0 and copper -1.300 to 312.25.

The dollar Index is -0.0100 to 75.1600.

On the Radar


08:30 GDP-Preliminary 3.0% cons.
08:30 GDP Deflator-Preliminary 0.8% cons.
09:00 Case Shiller 20 City Index -9.10% cons.
09:00 Consumer Confidence 47.5 cons.
10:00 FHFA Home Price Index 0.3%
02:00 FOMC Minutes

Click here for the full trading radar.

Good luck today!
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No positions in stocks mentioned.

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