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mat
Board Royalty
Joined: Apr 26, 2004
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 Posted:
May 16, 2007 - 10:01 AM |
 
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| Post subject: A valuable life lesson. How far away? |
China stockmarket
2006 - 130% increase
2007 - so far 50% increase
You see the crowds sitting around the stock rooms scattered around town. This is seriously akin to gambling. These places are like TAB's (Betting shops). All that is missing is Reggie cheering his horse down the home straight.
Before the end of this summer, there will be a HUGE crash, and all of these people, millions of them, will not know what the hell happened. NONE of them have lost yet. They take the daily increase in their stocks for granted, they have got their friends and family involved and the majority of them have probably borrowed money from friends/family to gamble on this market.
Within the next 3 mths, there will be a MASSIVE crash, and the public will be up in arms.
I CANNOT WAIT. This will be the absolute kick in the arse that this country needs.
Comments from anyone in the Finance area??? |
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dfoo
Post Roaster
Joined: Jan 19, 2005
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May 16, 2007 - 10:05 AM |
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They'll blame us foreigners. Somehow. |
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mat
Board Royalty
Joined: Apr 26, 2004
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May 16, 2007 - 10:16 AM |
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haha. FOR SURE. First they'll blame the government, then us. NEVER themselves.
A large bank made it's debut yesterday, up 71%. What a joke.
tick, tick, tick....... |
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dfoo
Post Roaster
Joined: Jan 19, 2005
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May 16, 2007 - 10:19 AM |
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Its human nature. Look at the US. After the crash everyone blamed Greenspan. Certainly not themselves for buying into companies that had no business model, no product and certainly no revenue. |
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yu888
Board Deity
Joined: Jan 25, 2003
Posts: 18037
Location: ZhongShanParkArea SH
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May 16, 2007 - 10:33 AM |
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yes, it will be interesting to see a crash of that magnitude first hand. But actually I dont think there will be such a crash in the next 3 months. Adjustmenst will happen but given where the money in the market s are coming from, i dont see the money supply dwindling thus the demand side for investment vehicles will still be great. End result is too much money cycling through this market...3 months wont change that. |
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mat
Board Royalty
Joined: Apr 26, 2004
Posts: 6967
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| Posted:
May 16, 2007 - 10:47 AM |
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YU i disagree. Because of where the money is coming from there will be a panic at the first sign of a correction.
If people see a fall of say 10 to 15%, they will start selling off. A big corporate investor is in for the long term, but these Ayis, and farmers who have their life savings AND BORROWED money all riding on this cannot afford that. They will see a fall and their irrational panic will set in. |
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mswp
Rocker
Joined: Mar 06, 2005
Posts: 725
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May 16, 2007 - 11:03 AM |
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I agree with Yu, just like there's an endless supply of people willing to work for $1 an hour, there's an endless supply of people pulling their money together to invest. If 1000 ayis and college students pull out, there will be 1000 more coming in to take advantage of the correction.
Plus, since it would constitute serious social disruption, I'm sure that a high priority for the government is making sure there's no sharp drop.
It's not just poor people borrowing money, people are pawning their homes and cars to invest. |
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8lrr8
StreetBeater
Joined: Oct 14, 2004
Posts: 2343
Location: here!
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May 16, 2007 - 11:04 AM |
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| mat wrote: |
YU i disagree. Because of where the money is coming from there will be a panic at the first sign of a correction.
If people see a fall of say 10 to 15%, they will start selling off. A big corporate investor is in for the long term, but these Ayis, and farmers who have their life savings AND BORROWED money all riding on this cannot afford that. They will see a fall and their irrational panic will set in. |
have u bought a sh*tload shares and are planning to short* like a muthafucker? cuz if u havent, i cant see how u can be as confident as u seem to be.
* i presume u're allowed to short a stock here in china. |
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mat
Board Royalty
Joined: Apr 26, 2004
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May 16, 2007 - 11:40 AM |
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I DOUBT you would be able to short sell here. Options/Warrants probably not available also. Could you imagine, the number of dodgy bastards here selling stock they didn't yet own and doing a runner. There would be a queue a mile long at the Canadian consulate. |
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dfoo
Post Roaster
Joined: Jan 19, 2005
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May 16, 2007 - 11:42 AM |
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It must be possible to sell short. If not legally, then illegally. |
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mat
Board Royalty
Joined: Apr 26, 2004
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May 16, 2007 - 11:45 AM |
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Anythings possible. "This is China" |
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yu888
Board Deity
Joined: Jan 25, 2003
Posts: 18037
Location: ZhongShanParkArea SH
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May 16, 2007 - 11:56 AM |
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nope, cannot short...whic is another reason whhy I dont think it will happen. Actually, i wish we could short becasue then this market would balance out better with opportunities to make money with upswings and downswings. But b/c there are no downswing opportubities, the money just keeps flowing in. I agree with teh logic that when every farmer and their mom are in teh market its time to get out. It sjust with this supply of farmers and moms, its gonna be a long time. take the most recent adjustment, it moved soem 9% but within 2 weeks was above where it had fallen from. They have NOTHING ELSE TO INVEST IN! I know and you know its gambling at this point, but without perfect information, they will continue to invest...
yes, its my opinion only , but based on watching how crazy people are here But as you say, ANYTHING is possible. |
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lalaabc321
Veejay
Joined: Dec 07, 2004
Posts: 2002
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May 16, 2007 - 12:01 PM |
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| dfoo wrote: |
| They'll blame us foreigners. Somehow. |
actually most of the foreign funds had been pulling out lately |
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lalaabc321
Veejay
Joined: Dec 07, 2004
Posts: 2002
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May 16, 2007 - 12:10 PM |
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the crazy frenzy about stock was created by the funds operating behind the major move,
local people was way too conservative years before
talking about buying stock early last year would be a joke
when the prices are high enough, public will bear the lost when it starts to drop
and all the funds just grab the money and searching for another golden land |
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shanghaiceltic
Board Royalty
Joined: Sep 20, 2005
Posts: 7617
Location: Perth WA
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May 16, 2007 - 12:17 PM |
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It has been the same with house prices here. As soon as they started to drop the buyers started to refuse to pay the banks as they thought their investment would always go up.
This appeared in the Asia Times Online.
Markets: Brace for a China-led chill
By Chan Akya
Eighteen years ago, Chinese students and intellectuals massed in Tiananmen Square to push through their vision of democratic reforms, egged on by an apparently conflicted central government, where the forces loyal to Deng Xiaoping were seemingly marginalized by those loyal to Zhao Ziyang initially, with tragic results for both the students and China in general.
While the comparison of the events of June 4, 1989, to today's
stock markets appears overly sensational at first, the thrust of recent articles on China, including my previous one, [1] has been on the apparent loss of policy efficacy by the central People's Bank of China (PBoC) in recent months.
Six months ago, total transaction volumes on the Shanghai and Shenzhen exchanges were less than US$5 billion per day. That figure now stands 10 times as high, at $50 billion per day. This volume is something China can be proud of, barring one minor detail, namely that the central bank and various policymakers would much rather not see it happening.
Even as central bankers exhort the country's citizens to beware of bubble-like conditions in the stock markets, investors appear unruffled, reversing the policy impact of any announcement. Be they students, farmers or construction workers, every Chinese living in the two big cities of Shanghai and Shenzhen appears now to have a brokerage account. Conversations in the normally noisy dai pai dongs [2] in Guangdong province and Hong Kong drop to a quick hush whenever the subject of stock tips comes up. In short, the stock market today represents a revolution against the diktat of the PBoC, questioning its very authority.
A symphony of bubbles
Experience from the rest of the world shows that stock-market bubbles are neither infrequent nor unpredictable; in most cases, they are compounded by the mistakes of policymakers. The technology bubble of the 1990s is a case in point, as investors chased the dream of a new economy that could offset the apparent physical constraints imposed on the functioning of the real economy, ie, bricks and mortar. Initially, the promise of new technologies wasn't accompanied by enough listed companies, thereby concentrating the bets of investors. It took a few years for enough listings to appear, but by then the damage had been done to the long-term prospects of the sector.
The dotcom era's little experiment failed because investors mistook the medium for the message, in other words, that emerging new technologies merely helped to rearrange the habits of consumers but did not necessarily alter the physical provision of products and services. Thus, while book lovers would move away from their local bookshop to an Internet store, they would still be buying books, and perhaps in higher quantities.
To that extent, the zero-sum game was the right strategy for investors, which was to sell the stocks of traditional stores while buying into online stocks. Meanwhile, a number of fancy technologies had no underlying cash flows, thereby rendering guaranteed losses for anyone purchasing them.
As the bubble burst in the early part of this decade, the US Federal Reserve cut interest rates and attempted to shift the consumption dynamic to the housing market. The result was a rapid expansion in house prices across the United States, fueled by a sharp relaxation in lending standards. Starting with the two coasts, the home-price boom moved rapidly inland like a wayward hurricane, uprooting economic assumptions in its wake.
Eventually, the market will have to come to terms with the reality of too many houses for a declining group of richer immigrants and lower-quality employment for anyone remaining in the hinterlands. I have previously written about what is likely in store for the US housing market; [3] recent observations with respect to prices of higher-end residences in New York only serve to strengthen that view. I am well aware that the article upset a number of bullish readers, but such is the problem with propagating unpopular views.
The US housing and stock bubbles positively pale in comparison to the ones being observed in many other markets, including property and stock markets across Asia. There are some notable exceptions such as Thailand, where a combination of policy missteps has left markets relatively stable rather than rising, but in most other places the boom is all too apparent. Even in straitlaced Singapore, house prices have risen broadly over the past two years, wiping out pent-up equity losses from the previous 10 or so years.
Chindia to the fore
But all these markets are mere sideshows compared with what's
going on in China and India. It is well-nigh impossible to complete secondary market transactions on high-end property in both markets, as a flood of new offers pour in. Most new property developments are sold within the first week of announcement, with the period more likely to be a day or so in the big cities of the two countries. By most estimates, property prices have doubled in the past two years in major Chinese cities, and more than tripled across major Indian cities.
Stocks are very similar, with significant money flows chasing a limited number of listed entities. The lack of selection is the key factor in pushing up overall market valuations to unsustainable levels, and as such is an eerie reminder of the aforementioned technology bubble.
More than India, it is China that faces the threat from investors chasing too few stocks. India's markets have a much longer history and, more important, many investors still remember the stock-market scandal of the early 1990s that wiped out the nest eggs of a few thousand people. China's problem is also one of magnitude: with more than 100 million investors directly participating in the markets, the impact of any downturn will be broad, and politically suicidal. As I wrote previously, problems encountered in the government of Hong Kong after a two-thirds decline in house prices since 1997 will help to guide policy direction in mainland China.
India's central bank has practiced vigilance on asset markets for a longer time, ensuring that banks are not providing easy loans for equity investing, and also tightening the guidelines on property loans in recent months. Rate rises have also played a part in keeping the equity markets below frothy valuations, although that is entirely relative to the excesses observed elsewhere in Asia. In contrast to the market behavior in India, Chinese investors have shrugged off recent rate rises, and banks have circumvented restrictions on lending through other means.
What will happen?
China will have to choose between the lesser of two evils, namely the protection of employment in its export-dominated industries or the safety net being created by investments in property and stocks by millions of its citizens. I believe it will choose to protect people's wealth more than lower-end manufacturing jobs; therefore a sharp revaluation of the Chinese currency, the yuan, is certain in the next few weeks.
In its aftermath, the economic cognate will have to shift from production to consumption; therefore we should see the stock prices of exporters falling even as those of companies servicing domestic demand will increase. Banks will have to absorb billions of yuan in defaults from the export sector, particularly to the many inefficient state-owned companies in northern China. That will cause a sharp decline initially in their stock prices, but I expect the outlook to improve rapidly thereafter.
For the rest of Asia, a yuan revaluation would set off increased volatility as investors try to take profits and other Asian countries adjust their currency values. In turn, their holdings of US and European government bonds as part of foreign-exchange reserves would diminish, sending up bond yields globally. That is how the adjustment in China would likely set off broader stock-market declines globally as investors come to terms with both higher interest rates and lower Asian appetite for Group of Seven assets. Sharp declines in stock prices would necessarily follow in most major Asian markets.
This correction would prove cathartic to the performance of Asian economies in the decades to come, but in the short term, pain is unavoidable.
Notes
1. India 1, China 0, Asia Times Online, March 3.
2. Dai pai dongs are uniquely Cantonese, generally specializing in a limited range of food items. Besides the delicious and cheap food, the eateries are also known for their communal seating, and extremely high noise levels.
3. Hobson's choice, ATol, March 7.
(Copyright 2007 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.) |
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shanghaiceltic
Board Royalty
Joined: Sep 20, 2005
Posts: 7617
Location: Perth WA
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| Posted:
May 16, 2007 - 12:21 PM |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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May 16, 2007 - 03:29 PM |
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I think Mat has a point. And Dfoo too. We will be blamed somewhat, I dont know how. And yes, people generally do not blame themselves. It's a "feature" I'd say 
I pulled out of China, India, Japan, Eastern Europe and ASEAN and put everything on very safe funds.
Thing is: this could cause not only serious financial mayhem but also SOCIAL mayhem when people see their savings evaporate.
The 71% of the bank IPO makes sense though. Normally in IPOs the range of investors that subscribe are corporate, not the Ayis.
Folks, that's serious stuff. Saigon Embassy evacuation style mayhem.
And with the Olympics around the corner, the timing couldnt be worse.
This is really serious stuff.
China wont ever be the same after the crash.
Wont be pretty.
I shat myself a bit after typing this. |
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g-force
Barker
Joined: Apr 07, 2007
Posts: 127
Location: Shanghai
Status: Offline
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| Posted:
May 16, 2007 - 03:47 PM |
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With a free-market economy, when the stock market goes crazy like now, there will be a correction, people will surfer a bit, and then things will recover. Unfortunately, China is not a free-market economy yet. The government will intervene, because: One, a lot of money from government officials, their relatives, their friends are also in the market; Two, China simply cannot lose "face" before the Olympics; Three, it is a "better" system, so they cannot allow a repeat of 1929 (or any other year) stock crash. I predict the government will come in when the market drops more than 10%. This will give people a false sense of security, and unfortunately will also prolong the pain and suffering. People with connections will come out alright, but the little people, the ayis, taxi drivers, massage girls, will be wiped out. |
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dfoo
Post Roaster
Joined: Jan 19, 2005
Posts: 4140
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| Posted:
May 16, 2007 - 05:53 PM |
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What do you expect the government to do? Buy stocks to prop it up? Force the market to close? Frankly, I don't think there is much they can do... If the government really wants to help cool the stock market then raise the interest rates. |
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lalaabc321
Veejay
Joined: Dec 07, 2004
Posts: 2002
Status: Offline
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| Posted:
May 16, 2007 - 06:11 PM |
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then all the banks will go bankrupt |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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| Posted:
May 16, 2007 - 06:31 PM |
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shanghaiceltic
Board Royalty
Joined: Sep 20, 2005
Posts: 7617
Location: Perth WA
Status: Offline
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| Posted:
May 18, 2007 - 07:52 AM |
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Feeding frenzy
May 17th 2007 | SHANGHAI
From The Economist print edition
Share prices are exploding in Shanghai
IN THE West when share prices go up, you are told to “fill yer boots”. In China the advice might be “fill yer face”. A new measure that Chinese retail investors use to justify entry into the booming stockmarket is that share prices in nominal terms are still cheap—at least compared with the price of a plate of pork.
But what's odd about that? Even standard measurements, such as price to earnings, have a surreal feel to them. Many companies trading on the Shenzhen and Shanghai bourses are at ratios last seen during the internet bubble of the late 1990s, or, closer to home, the Japanese and Taiwanese bubbles of two decades ago. Bank of Communications, China's sixth-largest bank, began trading on May 15th with a 71% leap on its first day. Its shares are now priced at 42 times expected earnings, a staggering level even given China's heady growth rate. One of its attractions is a stake held by HSBC, a global bank. HSBC trades at a meagre 13 times earnings.
High valuations do not deter punters. Five million new Chinese brokers' accounts were opened in April, two-thirds more than during the whole of last year. Retail demand, a result of individuals facing the simple choice of low-yielding bank accounts or booming stockmarkets, has helped push the market up by half this year and 250% in the past two years. Even housekeepers are reported to be leaving low-paid jobs to play the market.
Companies, too, are piling in. Earnings of Chinese-listed firms are being jet-propelled by “investment income”, observes William Liu, head of China research at CLSA Securities. That makes market movements blissfully self-reinforcing—higher share prices mean higher earnings—although of course it could work just as strongly in reverse, too.
China's government knows that a crash might well bring social upheaval, so it is gingerly trying to impose order. On May 11th a handful of politically connected institutions were granted permission to invest domestic funds outside the mainland, principally in Hong Kong.
Of far more weight would be for the authorities to open the country's capital account, and to allow short selling, which would wipe out the share-price discrepancy between China and Hong Kong. The government could also give retail investors more access to commercial paper, or high-quality bonds, so that they have an alternative to low-yielding bank accounts. However, it will permit only a trickle of each, because it fears cutting into the fat margins that banks earn from paying depositors next to nothing and lending at high rates—a margin that is needed to cover for the banks' bad loans.
Perhaps the most important change would be to allow investors more access to information on company performance. Western investment banks could play a role here; unlike their American counterparts, they restrict the amount of information they convey to the public. As it is, retail investors have little to go on except price movements; and if you are not sure what the earnings are, no wonder you compare prices with the cost of your last meal. |
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dfoo
Post Roaster
Joined: Jan 19, 2005
Posts: 4140
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| Posted:
May 18, 2007 - 09:30 AM |
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Those last two paragraphs say it all... Unbelievable. |
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LaVecchiaSignora
SuperStar
Joined: July 24, 2006
Posts: 1531
Status: Offline
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| Posted:
May 18, 2007 - 09:34 AM |
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There will not be a crash in the coming 3 months. But it is close enough Mat.
After Chinese New Year 2008. |
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Kiwi
Post Boaster
Joined: May 07, 2003
Posts: 4763
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| Posted:
May 18, 2007 - 10:10 AM |
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| dfoo wrote: |
| What do you expect the government to do? Buy stocks to prop it up? Force the market to close? Frankly, I don't think there is much they can do... If the government really wants to help cool the stock market then raise the interest rates. |
Wouldn't be at all surprised if they bought stocks. They did this in Taiwan around 2001. The govt. set up a National Stabilization Fund. And the Taiwan market is already restricted to 7% daily price movements, so less volatile than most western markets anyway - at least in the sense of daily movements.
I can't remember how many times the NSF entered the market. Must have been 1/2 a dozen or something I think. |
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