Greece has been hogging the economic spotlight, but the Chinese market has lost an amount totaling Mexico's economy in the last couple weeks. Ever wonder wtf is going on there beneath the bubbles? Interesting article that probes a little deeper... China's authoritarianism is dooming its economy
I have been living in Shanghai for the past two months. With the growth of the economy, many ordinary people have begun trading stocks. I've seen all kinds of people doing it, from people selling fruit, people on the subway, people selling fake electronics, kids, and grandparents alike. Stock valuations for Chinese companies are too lofty to be justified by fundamentals, especially as the Chinese economy cools down and cracks begin to show. I'm worried that these investors, often borrowing money to invest, will begin a stampede for the exits. Because the Chinese government doesn't have real estate as a way to generate consumer demand, they were hoping that the stock market would get people to feel good and continue the consumer spending that they so desperately need to keep economic growth going. China has made a lot of announcements about multinational projects, such as the Silk Road and AIIB. Those projects are designed to be levers to generate job growth as well as other commercial opportunities that will keep the economy going. It's not clear when those might be able to offset falling stock prices (though the market has recovered some), as these projects are not quick to materialize.
A couple of things though 1) Even with the recent crash, the Chinese stock market today is still up substantially compared to Jan 1st. 2) Stocks as a percentage of total household assets in China is significantly lower than that of the US
After reaching seven year highs, stocks dropped 30% in three weeks. Economic measures have been weaker in the past year than they have been in the past seven years, so something is off here. While the markets have recovered a bit since recent lows, the government has not had the impact it has normally had in propping up the market. Almost every investment bank thinks China's stock market is overinflated. Morgan Stanley made a "sell" call weeks ago, and now expects the SSE to fall to 3,250 by mid-2016. That statistic is not relevant if you consider the impact the individual investors have on the Chinese markets. The SSE is not a global market like the NYSE; it is mostly a domestic one. I would say concern with these individual investors is warranted, considering the immaturity of China's investing culture. China individual investors are not value investors. Sky-high valuations do not faze them. They are primarily momentum investors who buy whatever is moving up and sell whatever is falling. When unsophisticated investors run into trouble, they panic quickly and try to get out at any price. The same investors boosting the market as growth slows will take it way down when it begins to fall.
Just got back from first trip, a tourist trip, to China. Chonqing, Yichang, Beijing and Hong Kong. I was blown away by the highway system and a lot of the infrastructure which we seemingly can't afford any more in this country. Foreigners I talked to were very impressed by the changes in China in the last ten years. There seems to be in this country quite a disconnect between Wall Street and main street with an almost inverse relationship for most of the people who have little in the market. What affect will this have in China? I know they are worried about the little guy investors who just got in the peak getting pissed off, while in this country the little guy investors who get taken at the peak are in general a docile lot.
Why China's Stock Market-bailout just might work By Jame Stewart of The New York Times Faced with an unnerving sell-off in its major markets that at one point had wiped out nearly $3 trillion in value, China has announced a series of measures to stabilize stock prices, including the establishment of a 120 billion RMB($19.4 billion) fund for the country’s largest brokerage firms to buy stocks. So far, it’s hard to tell whether the government’s intervention is having much impact. After modest gains on Monday on news of the government’s plans, Chinese shares resumed their decline, with losses on Wednesday spreading from more speculative issues (many of which have now halted trading) to investor favorites listed on United States exchanges, like the online retailer the Alibaba Group and the Internet search company Baidu. But Chinese stocks rebounded on Thursday and Friday .......... For all the recent talk of liberalizing Chinese markets and opening them to more foreign investment, they remain as much political institutions as financial ones. It was Chinese government-sanctioned talk about the high returns offered by stocks that helped stoke the rally that caused valuations to double in just four months earlier this year. Many Chinese investors are now looking to their president, Xi Jinping, to make good on that encouragement and the implicit guarantee that came with it. No one doubts that China could step up the effort. “The Chinese government’s wealth is huge. They have incredibly deep pockets.” ........................ according to some equity experts “From a purely economic perspective, all of this suggests China’s effort will fail,” “China is a Communist regime that can ignore market rules.”, if China hopes to succeed, it could substantially increase the size of its financial commitment, and at some point the market will respond.
They aren't worried about little guy investors. They are allowing people to use their homes as leverage.
I frequently disagree with glynch, and he frequently disagrees with me, but I think that was uncalled for. Besides, North Korea would never give him a resident visa.
lol, they threatened to put anyone who "maliciously shorts" stocks in prison. That's one way to stop the selling. It's also a way to make your stock market irrelevant.
Because they can't afford it either. So much of it has been built on nothing but bank loans which are never going to be repaid. One by one the municipalities are going to have to start selling off assets, going bankrupt, or getting hot inflated rmb from the central government which will have to reinvent their banking system for about the 4th time since 1984.
On further thought...If the housing market goes bust, wouldn't their homes be as good as worthless anyways? In this case, following the mob and knowing when to cash out seems to more optimal than being fiscally responsible.
As a day trader I suppose. For the average person investing long term for retirement it might be different.
Not really, Nook. I think you are just confused and probably not just an old fashioned McCarthyite. I am a democratic socialist. A sort of left wing Scandinavian type socialist or like Pope Francis. or Chomsky. Like Chris Hedges, who lived in Switzerland, I, too, praise the type of society there that saw the elimination of poverty there and in Scandinavia during the 1980's but which present day neo-liberalism/ bankers are trying to demolish as it represents wealth transfer that the international banking elite, like they don't have enough money now, wants. I dislike the authoritarianism anti-free speech policies of China and of the countries that called themselves communist". Iran and Russia are also too authoritarian for my liking, when it comes to civil liberties. However, I realize the difficulty in stopping the elite dominated international media from interfering in their desire for independence and their own model of development. Give me Snowden and not having all our communications spied on. Give me free unions and work place democracy in which I don't have to be afraid of being fired for no reason by corporate overlords or government officials for that matter. However, I am also strongly against attempts to demonize Putin/ Russia or Iran or Chavez/Maduro/Venezuela under the name of "democracy" when it is actually based on a desire to dominate their oil or resources and keep their traditional oligarchic elites in power. Similarly I am against the desire for the profits generated for some by a new Cold War (Russia) or a new active war (Iran) or whatever the practically insane desire for domination or war that the so called "neo-cons" are always pushing. BTW anyone who thinks Chavez could not have made himself a real dictator if he wanted are just misinformed. I don't like the policies of folks who call themselves "democrats" but who are in are in favor of a .001% owning everything even if couched in the ideology of simplistic Econ 101 economics which so many have been taught to believe. I am against the type of brain washing by the Media owned by the .001% that call for armed struggle in cahoots with local oligarchs to overthrow democratic governments as in Venezuela or Ecuador if they promote policies against rapacious capitalism that leaves so many illiterate, poor and hungry. Similarly I am against the type of "democracy" of the "Manufacturing of Consent" ala Chomsky that we have in which the media pushes folks to be only be interested in infotainmnent, or biz news which is largely Econ 101 propaganda or politics limited to just divisive social or racial issues or continual horse race electoral speculation. A "democracy" which allows a few billionaires to invest their virtually unlimited money in elections and than lobbying repulses me as a democrat. To be fair as sometime pointed out by the libertarian/conservative types this the USA was never designed to be a democracy but a Republic.
meanwhile something else happened in China http://www.dailymail.co.uk/news/peo...o-changing-room-store-TOURIST-ATTRACTION.html
