HEXUS.sharewatch: Chinese stimulus package boosts shares

Criticisms

One of the main criticisms of this type of demand management is that it's inflationary - i.e. tends to drive up prices. Chine seems to agree with the Bank of England in its assessment that inflationary pressures have eased and thus Keynesian measures are a lot less risky than even a few months ago.

A big difference between China's move and our own cut in interest rates and proposed increase in public projects is that the Chinese are deriving this extra money from a budget surplus, while most Western countries are borrowing in order to prop up their economies.

Our HEXUS.sharewatch list reveals a drop of four percent or so in the Dow and NASDAQ in the past week. The FTSE 100 figure was taken at 09:30 this morning, after markets had opened, and reflects a three percent jump in the index in apparent response to the Chinese news.

Quite a few technology companies have under-performed even this declining market. AMD and HP have both dropped by nearly ten percent in the past week. In neither case does this seem to be a product of specific bad news on the part of the individual company, rather an exaggerated adherence to a broad decline in prices brought about by some negative economic news on Thursday, including a pessimistic forecast from Cisco.

Intel, Google and Apple all dropped by around nine percent last week, with Thursday also being the day of the big drop, so it seems that investors thought the bad tidings would affect the tech sector more severely than other sectors.