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Chinese Investors Cautiously Optimistic After Global Market Turmoil


Chinese investors are cautiously optimistic about future market growth despite tumbling stock prices and growing global financial uncertainty. Market experts, however, say Asian economies are particularly vulnerable to shocks because they are more dependent on exports. Daniel Schearf reports for VOA from Beijing.

Chinese stocks dropped sharply after investment bank turmoil this month in the United States, but made quick gains this week to end Thursday on a three-week high.

Financial stocks led the recovery, encouraged by market reforms and a plan by state-owned enterprises to buy some shares back from investors.

China's investors are showing confidence the market will continue to rebound.

Forty-year-old Cheng Haixia has only been trading for one year and lost 40 percent of her more than $2,000 investment.

She says she lost some, but looking at the future, China's economy is growing so it should be fine.

Not all investors agree.

Meng Bai has been trading stocks for about eight years and has more than $100,000 invested. She says China's stock market is not mature and therefore not stable.

She says because the market is not very developed, it explodes down and explodes up. Whereas a normal stock market should go up and down, China's explodes down. She says this way can beat you to death.

China's Shanghai index, a key market indicator, has dropped almost two-thirds from its peak last October.

Pan Jingliu works for a travel agency in Beijing. He managed to pull out of the market before it dropped, but says many of his friends were not so lucky.

Pan says the best way is to pay attention to the "Big Boss,"-in other words, the government. He says one should know the government's economic policy from top to bottom, understand it, and be familiar with it. He says if you do not understand the government's intentions you can make mistakes.

Other markets in Asia mostly fell slightly Thursday on concerns about the effectiveness of Washington's plan for a $700-billion economic bailout.

Michael Pettis is a professor of finance at Peking University. He says Asian economies are much more dependent on U.S. consumption than other parts of the world.

"A significant portion of the growth in Asia has been because of international trade, particularly with a very strong export orientation," Pettis said. "So, as the U.S. trade deficit has grown as a share of total GDP (gross domestic product) over the last 10 years, that means that the rest of the world has become more dependent, not less dependent, on U.S. growth."

Pettis says the financial crisis could do more damage to Asian economies if U.S. consumption drops sharply.

The global crisis was sparked by defaults in the U.S. on high-risk home loans, the so called sub-prime mortgages.

Investment banks were severely affected. Lehman Brother's declared bankruptcy and Merrill Lynch sought financial protection in a buy-out by Bank of America.

Chinese banks had invested over $720 million in the now bankrupt Lehman Brother's and say they will closely monitor their potential losses.

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