The Path Of Recovery?

All the markets in world are seem to be in sync as they are now reflecting the same mood all around. Few days back we saw overwhelmingly sharp decline in markets across the tables, who was driving this drift: China. Does this means that the next bubble going to crash the world economy will be China?

China in last one week has released very depressing housing and credit data. It has been heard that China has spent as much as 1.5 trillion $ in it's credit market in last one year alone fighting the recession which is three times of entire Indian equity market volume. US has lost over 4 trillion $ in last one fiscal year and has been on path of recovery ever since. Until now only US market was considered as the global parameter to gauge the health of world economy but in last one year the tide has shifted to less known economies, China to be precise. Until now China had hold it's economic balance sheet to be unveiled but it does seem quite evident now that the next big thing in the world economy is China.

Once called safe heaven Dollar has taken most of beating by this economic downturn and is one of the most vulnerable underlying assets causing the money flow to get diverted to safe investments which is eastern and south Asian markets, China and India to name a few. This is one of the key reason why US is not on a galloping path of recovery. Quite rightly so since the equilibrium in the world economy was need of the hour. One stand alone economy shouldn't be given the driving seat. In next six months outlook seems to be more inclined towards Asian markets. The mood here would decide the turnarounds in the world economy. If the US economy is able to provide a breather from it's export, retail and housing market then it may be possible that the money flow would be diverted again to dollar but until then we only need to wait for non-financial data from US to bring back the confidence of global investors.

The big question which can be asked then would be: are we on the path of recovery and is the recession over?

I think we are on the way of recovery, eastern Asia will definitely be better than west like US and UK. Surely there will be a big bounce in next 6 months barring US. The conflicting noises that China situation is going to get worsen would be only confirmed once they provide their next set of exporter and production data . Chinese economy is recovering on a rate of 7.5% , second highest in world. This is still a fragile recovery though and the policy makers are not leaving any stone unturned and now they are tightening the screws this time. The bond and currency market around the world seems to be in better shape indicating that currently there might not be any drastic policy change in the economic dynamics in any global economy which is helping the commodities to sail smoothly.

The turbulence in the equity market every now and then could be a problem due to the liquidity and short covering along with profit booking by the investors, this should not trigger any panic in market though as market has matured tremendously in this 2 year old recession cycle. No index in the market is an exception and all have recuperated well in past six months or so. I see better future in Tech and commodities in next twelve months, betting on old & gas sector could also come fruitful. The global majors like Microsoft, Apple etc are going to grow tremendously and leading the pack would be google should their new operating system is a hit. What market would do people have been saying that correction in inevitable from now on. Hedge funds are bidding big on market crash causing panic every now and then in the investors but I still see things getting leveling up and stabilizing.

To me world seems to be healing but the it will take a while until we can breath fresh air of economy.