In this month's ElliottWave's Financial Forecast, Steve Hochberg and Peter Kendall provide a similar analysis:
It takes a large surge in positive social mood to motivate people to erect the world’s tallest buildings. When the cooperative efforts of builders, business and government manage to literally push to the sky with the construction of a record-tall building, social mood is almost certainly at high tide. This tendency is tightly grafted to bull markets in stocks, back through at least the late 1920s, when the construction of the Empire State Building topped off the Roaring Twenties. At the outset of the more recent mania era, EWI made the connection between the epic rise in stocks and a burgeoning wave of skyscraper development, which continues to play out. In September 1996, for instance, EWT noted that expanding efforts to build the world’s tallest building are “assertions of power” and signs “of an arrivest culture.” EWT added that these buildings are often finished “after the bear market has begun.” The chart on page 249 of The Mania Chronicles shows that this is exactly how the great peak panned out. Kuala Lumpur’s Petronas Towers claimed the world’s tallest title in 1996, followed by Taiwan’s Taipe 101 and Dubai’s Burj Dubai, now known as the Burj Khalifa (after the Dubai development authority had to be bailed out). In each case, the plans for the buildings were announced as the stock market for each respective country raced toward all-time highs, and each building was completed during subsequent bear markets that are still in place.
The greatest skyscraper boom, however, belongs to China. The current tallest building in China, Shanghai World Financial Center, reached its full height in September 2007, a month before the Shanghai Composite’s peak. This is another stock market high that remains intact. Incredibly, the peaking positive mood motivated construction of the Shanghai Tower, which will become China’s tallest building at 2,074 feet high. It was started as the Shanghai Composite rallied sharply toward a countertrend high in August 2009. It will be just 700 feet short of the Burj Khalifa, still the world’s tallest skyscraper. But what the Chinese skyscraper boom may lack in record heights it makes up for in breadth. China already has six of the 15 tallest buildings in the world. By 2012, 34 of the 100 tallest buildings will be on Chinese soil. Most important, the construction of a new tallest building in China creates a giant non-confirmation with the country’s main stock average, which is still 56% below its 2007 all-time high, as the chart shows. Despite a weak stock market relative to the rest of the world, China’s still-raging skyscraper fever testifies powerfully to the unfettered optimism that surrounds its future. According to the estimate of an Australian trade specialist, for instance, China still needs “50,000 new skyscrapers over the next 15 years to cater to its expanding urbanization.” Yet, according to many other accounts, whole cities of vacant skyscrapers exist. We’ll stick with the perspective offered by the lagging Shanghai stock market, which is clearly unimpressed with all the building. The massive divergence between the Shanghai stock index and the Shanghai building boom suggests that China’s bear market, already four years old, will be one for the ages.