Yesterday the terrist attack in China Northwest Xinjiang province caught a lot people’s nerve. People felt nervous because they think bad things could happen in Beijing during this Olympics. My sense is it will NOT, because Beijing is probablly the most heavily guarded city in the world in next 2.5 weeks (Aug 8 to 24).

(Bird Nest and Water Cube; source: www.schneiderism.com)

Interestingly there is a theory in the market that says “China economy growth will dramatically slow down post Olympics”, this assertion may not turn out to be true either. Because just like the Olympics effect on economy is overly-hyped, the China economy will continue to grow at a healthy speed because:

1) Increasing middle class and domestic spending (check out MasterCard forecast from my friend fenng);
2) Development of the middle (e.g., Wuhan) and west (e.g., Chongqing);
3) Reconstruction of earthquake region, the demage was estimated to be 1.2 trillion CNY (170 billion USD), and the central goverment has pledged to re-build. Unlike the US federal goverment pledge to rebuild New Orleans, when Chinese goverment determined to do something, they meant it because they got the money (hint: the US treasuries and Fannie/Freddie paper).

While I don’t want to predict the short term market trend, I think when the game is over, the smoke from firework is clear in Beijing, we will have a huge relief and so is the market. That being said, I think we should do research on what stock we buy, not just buy indiscriminately.