China's index to fall further

The Chinese markets, represented by the Shanghai Composite Index, have dropped by 22% over the past one month. And if you this was enough, read what former Morgan Stanley Asian economist Andy Xie has to forecast. Xie says that the Chinese Index, which has already been the world's worst performer in August, may fall another 25% as the country's economic recovery isn't sustainable.

Data Source: Yahoo Finance
"The market is in deep bubble territory. The recovery is not sustainable," said Xie, who resigned as Morgan Stanley's chief economist in Asia in 2006 and now works as an independent economist. Xie had in fact sounded caution on Chinese stocks and property at the start of August, when he had referred to these as the next bubbles to pop. And like then, he still believes that the bursting of the bubble may lead to a very hard landing for the Chinese economy.

While Indian markets have shown some restraint despite the crash in China since the start of August, it would be interesting to see how long they will be able to hold on, as foreign investors' nervousness with China will definitely have its repercussions around the region.