Market Performance After 2008 Crash

Just had a simple look into the market performance after the 2008 financial crisis triggered from US sub-prime mortgage problem. There are the comparisons between Asian markets with Dow Jones:

Index	2007-Peak	2008/9-Low	2009-End	2010-End	Current
SSE	100.00	27.21	53.55	45.88	47.48
STI	100.00	37.25	73.71	82.23	75.14
HK-HS	100.00	33.78	68.02	72.77	70.56
JP-Nikkei	100.00	38.22	57.63	55.90	50.31
DOW	100.00	46.00	74.46	81.67	83.71

The values are expressed in percentage using the 2007 peak values as 100%.
Since the crisis initiated from US, one would expect the Dow to be most affected by the crisis. Instead it was SSE (Shanghai Stock Exchange) that was worst hit. In terms of recent recovery, there were so much talk about China leading the world market in the economic recovery from the crisis. Instead, Dow was the best performer and SSE was the worst performer among these markets.

Plotting them on a simple graph for comparison. It can be seen that both SSE and Nikkei were the worst performers. However, we need to take into consideration of the recent drop in Nikkei due to natural disaster. Discounting that could have brought them back up by 10%. But still, they are the second worst performer in Asia.

The fact that SSE is not performing as expected is slightly worrying. One thing we can assume is that the SSE is extremely over priced in 2007 and now it is more reasonable priced. However, if the market in China is really good, why shouldn't it be over priced? Isn't the market suppose to chase after promising counters and ditch the unattractive counters? I thought market is always over bought on bullish sector and oversold on bearish sector. Maybe I am over paranoid. One other explanation is the QE by Fed really flooded the US market with liquidity causing the price to be overvalued. Another angle to look at it is the value of US dollar. How much has it depreciated against other currencies? Is SSE a victim of stronger currency? What about Nikkei and others?

Modified: 20-Mar-2011.
After the Nuclear crisis in Japan, the Yen shot up and the G7 work together to bring it down. A strong Yen will hurt Japanese economy more at a time when they desperately needed a weaker currency to build up their internal economy.

With a weaker Yen, there will be impact on the US economy and may cause bigger US trade deficit. The US has to again release more liquidity into the market by QE (3) and potentially will hurt China's export. So, what will China do in response? Will China take the reverse role with US by significantly increasing local consumption? How ready is China's economy to do that? How much real purchasing power do China have?