How Do You Stop a Running Bull?
With a Stamp.
May 30, 2007, news out of Hong Kong indicated that China’s Finance Minister tripled the stamp tax on its countries stock trading. The tax on stock trades was hiked from 0.1% to 0.3% sending the markets down roughly 7% by close of business on the day. The Chinese Government has long used changes in the stamp tax as a method of influencing stock prices and cooling down a bull market. Going forward over the summer months we should see some volatility in the global markets.
But, lets keep a few things in mind:
- The Chinese Market has nearly quadrupled since the start of last year. Pullbacks in the market are healthy in moderation.
- Stock Market Prices DO NOT represent a countries GDP growth (Gross Domestic Product).
- China is still set to host the 2008 Summer Olympic Games which has never left a country in a down period in the 3 years leading up to a games.
As long-term investors we understand there is volatility in the stock markets whether it be locally in Canada or Globally in China. The advantage of owning a Globally Diversified Investment Portfolio is it allows you to capture the gains of the markets on the upsides but it also protects you from direct exposure on the downside.
If you have more questions regarding whether or not your Investment Portfolio is Globally Diversified, please do not hesitate to call me.