China to Take Down World Financial Markets

[wayneL]

FWIW an article from the Daily reckoning:

http://www.dailyreckoning.com.au/chinese-stock-market-2/2007/05/17/

Chinese Stock Market Showing “Characteristics of a Powerful Mania”
Posted by Dan Denning on May 17th, 2007

Investors in the Chinese stock market have clearly taken leave of their senses. So have concert goers. We read this morning that pop-diva Christina Aguilera has added the city to her concert tour. Yan Wang, Chief investment strategist at BCA Research, puts it this way, “The parabolic price moves, expensive valuation and mass speculation in the Chinese stock market have taken on all the characteristics of a powerful mania and a building speculative bubble.”

What he said.

Since falling 9% in one day in February, stocks in Shanghai have risen by 40%. In the 50 trading days since the February correction, stocks have risen all but nine of those days. And on the calendar year, the index is up 45%, better, even, than Australia’s roaring bourse.

Maybe this is why James Packer is so eager to get a casino going in Macau. We’ve been told that Macau is the only place in China where gambling is legal. But obviously, the people saying that don’t have a clue. What’s going on in Shanghai is higher stakes gambling than anything you’ll find at a black jack table or a pokie.

But just what’s at stake? The tech bubble wiped off nearly $7 trillion in market cap from the American stock market. This was mostly fictional wealth, paper gains that Baby Boomers were sitting on headed into their retirement years. Crucially, the housing boom come along after the tech bust, courtesy of Alan Greenspan’s low interest rates. And the tech boom happened early enough in the financial life o America’s boomers that they still have time to recoup the paper gains they lost in the tech bust.

Here’s the difference, though, between the last American bust and the next Chinese one (or perhaps even global.) In America’s bust, most investors did not lose a lifetime’s worth of capital. True, they lost a bull market’s worth of gains. And that was painful, humiliating, and a large financial setback. But many boomers still had nest eggs from which to rebuild, not to mention equity in their homes, which led, of course, to the huge property boom. It’s there, by the way, that the real financial damage could come to the Boomers.

Back to the Middle Kingdom, though. Can new Chinese investors afford to lose everything they have in the stock market? Can anyone ever afford to lose everything in the stock market? Of course not. It helps if you have other assets to fall back on after the bust. You are less likely to riot in the streets.

And if you think we’re exaggerating about the potential for instability from a stock market crash in Shanghai, it doesn’t take much. Commuters in Buenos Aries torched some ticket booths in the country’s main train depot simply because the trains weren’t running on time. When a mob gets momentum, it’s more dangerous than a cloud of locusts in a cornfield.

China’s enlightened leaders would love to keep things humming along until after the country shows itself off to the world at the 2008 Olympics. They may yet pull it off. But once the animal spirits are unleashed, they are nearly impossible to control. Like a bad storm, you simply have to ride it out and reckon up the damage when the skies clear. Stay tuned. We see rain in the financial forecast.

Dan Denning
The Daily Reckoning Australia

 

[Temjin]

Excellent article there, this is the best part.

But once the animal spirits are unleashed, they are nearly impossible to control.

Especially when THESE animals are BORROWING to their MAX, making them even insane when things turn really bad.

 

[Bazmate]

I wonder if Sydney is preparing an offer to host the '08 Olympics, ala Greece, just in case China turns to custard and can't make the party??

Could it really come to that??

 

[disarray]

i don't think so. with an endless supply of cheap labour to throw at a problem you can achieve anything. like the pyramids. i think the thread title needs to be a bit more dramatic though. bears just love their drama.

 

[>Apocalypto<]

This is the most stupid thread I have ever seen.

Unless you have been to china and seen the country in action I think none of you have any idea to how it works, i have been there twice and do business there i still have no idea, so are you all china experts.

1. chinese stock market is independent of the economy, its still government controlled!

2. Bank of China will never let any kind 87 Crash last more then 1-2 days TOPS! they poor money in to stop the sell off's and they have so much right now they could stop anything.

3. Sell off in Feb was bound to happen with or with out china sell off which could have been government induced to whip out the speculators! noticed it stopped the next day! our market at that time had risen from Sep with out any real hitch also DOW rose from JUL it was a excuse to get out!

China will not cause a bear market, no we will use any excuse as a reason to sell off from fear to protect 4 years of gains!

Remember markets are made of people, people look for any reason to justify there actions! China does not push the sell button in panic for u, you do.

 

[Mousie]

This is the most stupid thread I have ever seen.

Unless you have been to china and seen the country in action I think none of you have any idea to how it works, i have been there twice and do business there i still have no idea, so are you all china experts.

1. chinese stock market is independent of the economy, its still government controlled!

2. Bank of China will never let any kind 87 Crash last more then 1-2 days TOPS! they poor money in to stop the sell off's and they have so much right now they could stop anything.

3. Sell off in Feb was bound to happen with or with out china sell off which could have been government induced to whip out the speculators! noticed it stopped the next day! our market at that time had risen from Sep with out any real hitch also DOW rose from JUL it was a excuse to get out!

China will not cause a bear market, no we will use any excuse as a reason to sell off from fear to protect 4 years of gains!

Remember markets are made of people, people look for any reason to justify there actions! China does not push the sell button in panic for u, you do.

Agreed re the overall moral of your post. But if the BOC pour in money to stop crashes (read: to fund the irresponsibility of its citizens' borrowing) there'll be hell to pay for Chinese MNCs when it comes to negotiating contracts with overseas partners.

Devaluation of RMB leads to inflationary pressures on it, what follows is basic economics really.

 

[>Apocalypto<]

Agreed re the overall moral of your post. But if the BOC pour in money to stop crashes (read: to fund the irresponsibility of its citizens' borrowing) there'll be hell to pay for Chinese MNCs when it comes to negotiating contracts with overseas partners.

Devaluation of RMB leads to inflationary pressures on it, what follows is basic economics really.

No arguments from me.

People just have to understand china is not the be all and end all of the world the USA is still in that chair.

China is very well aware of its current situation and there citerzins borrowing rates.

You have to understand the Chinese government is very switched on and runs a tight ship they will take action when it is needed. they are not backward farmers they are very smart people.

LOL but as i say that ileagal power stations are built all over the country with out central government approval major one found in inner mongolia!

I am over bored financial reporters digging up whateva crap they can on china just to sell some magazines and news papers based around fear.

the Chinese economy has been growing at 8-10% since the seventies, believe it or not! I read that in china the other week, shocked me a bit.

I am not one to believe in western hype.

But if the BOC pour in money to stop crashes

They have and they still do.

97 asian crash BOC stepped in there as well.

last FEb BOC not only stepped in but may have also started the sell off.

 

[bean]

US will lead and China will follow

Just another article for interest

www.financialsense.com/fsu/editorials/andros/2007/0517.htmlhttp://www.financialsense.com/fsu/editorials/andros/2007/0517.html

 

[Mousie]

They have and they still do.

97 asian crash BOC stepped in there as well.

last FEb BOC not only stepped in but may have also started the sell off.

Oh yeah? Any evidence that BOC stepped in last Feb, and 97'?

Boy am I gonna look forward to this crash on the dragonic scale...

 

[Uncle Festivus]

BEIJING (XFN-ASIA) - Participants in the Qualified Foreign Institutional Investor program are reducing their holdings and shifting to more reasonably-valued Chinese stocks in other markets on fears that mainland stocks have run up too rapidly, the official Xinhua news agency reported, citing data from Emerging Portfolio Fund Research.
By the second week of May, QFIIs had withdrawn 574 mln usd from the markets, Xinhua reported.
Their holdings fell to 2.525 bln shares in 243 listed companies in the first quarter, down 11 pct from 2.848 bln in the previous quarter.
'The once much sought-after QFII quotas are becoming superfluous,' Xinhua quoted CLSA analyst William Liu as saying.
Liu said the market is reaching a ceiling and could see a decline of 20-25 pct.

 

[Temjin]

US will lead and China will follow

Just another article for interest

www.financialsense.com/fsu/editorials/andros/2007/0517.htmlhttp://www.financialsense.com/fsu/editorials/andros/2007/0517.html

Excellent article too bean, thanks for it.

This is the most stupid thread I have ever seen.

Unless you have been to china and seen the country in action I think none of you have any idea to how it works, i have been there twice and do business there i still have no idea, so are you all china experts.

1. chinese stock market is independent of the economy, its still government controlled!

2. Bank of China will never let any kind 87 Crash last more then 1-2 days TOPS! they poor money in to stop the sell off's and they have so much right now they could stop anything.

3. Sell off in Feb was bound to happen with or with out china sell off which could have been government induced to whip out the speculators! noticed it stopped the next day! our market at that time had risen from Sep with out any real hitch also DOW rose from JUL it was a excuse to get out!

China will not cause a bear market, no we will use any excuse as a reason to sell off from fear to protect 4 years of gains!

Remember markets are made of people, people look for any reason to justify there actions! China does not push the sell button in panic for u, you do.

I am afraid YOU are the one who DO NOT KNOW how the Chinese market works at all. Have you EVER been and through a market crash? Look at the tons of insight from independant experts out there. The evidences are so obvious.

To think the Chinese government have the slightest ability to resolve their current crisis is absolutely stupid.

After reading the article above, I have to full 100% agree with the author's insight. I am a Chinese myself and the way he describe the way of business in China and the culture is 110% true.

It's human nature to "get ahead", it's Chinese culture to "get rich", and when creating wealth through creating new businesses are severely restricted by "selected members" by satisfying corrupted officals, the only way to acquire wealth legimately is to INVEST.

Again like I said, those who hold a large portion of their portfolio in Australian stocks should seriously think about their position now and should start thinking of strategies to minimise the impact of the possible chinese bubble market crash.

 

[Kimosabi]

Again like I said, those who hold a large portion of their portfolio in Australian stocks should seriously think about their position now and should start thinking of strategies to minimise the impact of the possible chinese bubble market crash.

I thinks it's going to be a combined American/Chinese Crash and they will probably feed on each other going down.

I'm sorry people, but I think we are hopping on the edge of the abyss...

 

[Uncle Festivus]

The central bank also lifted the bank reserve requirement ratio by a half percentage point, and it also increased its benchmark one-year lending rate by 0.18 of a percentage point, to 6.57%, and the one-year deposit rate by 0.27 of a percentage point, to 3.06%.

Goldman Sachs warned last week that China's booming A-share market could turn into a bubble if speculation among exuberant domestic retail investors is not curbed. Other financial firms, including UBS Securities, as well as Governor Zhou Xiaochuan of the People's Bank of China have also expressed concern in recent days about the possibility of a bubble forming in the stock market.
"The recent rise in interest rates will not be enough to dampen speculation in the Chinese equity markets," Moody's Li said. "The overvalued stock market remains a problem as the current boom is unsustainable."

...

 

[nizar]

Again like I said, those who hold a large portion of their portfolio in Australian stocks should seriously think about their position now and should start thinking of strategies to minimise the impact of the possible chinese bubble market crash.

Do you have any evidence that our market follows the Chinese markets?
Or even the US?
Or that any of world financial markets follow China?

One day last week the SHanghai index fell 3.6% and nobody cared.

 

[CanOz]

Do you have any evidence that our market follows the Chinese markets?
Or even the US?
Or that any of world financial markets follow China?

One day last week the SHanghai index fell 3.6% and nobody cared.

I tend to agree with Nizar in that a fall in the SSE is not going to trigger panic on its own, unless its a more than a one day 3-4% loss. Australian investors won't be too worried unless the panic spreads to other Asian markets, and then Europe, and then the US.

All of the major global indices are at or near thier historical highs.

The next few weeks will tell us whether they continue through resistance, consolidate above, or fail.

Certainly exciting times, history in the making here folks.

Cheers,

 

[nizar]

I tend to agree with Nizar in that a fall in the SSE is not going to trigger panic on its own, unless its a more than a one day 3-4% loss. Australian investors won't be too worried unless the panic spreads to other Asian markets, and then Europe, and then the US.

All of the major global indices are at or near thier historical highs.

The next few weeks will tell us whether they continue through resistance, consolidate above, or fail.

Certainly exciting times, history in the making here folks.

Cheers,

Can,

Are you in the markets or (still!!) watching from the sidelines?

 

[CanOz]

Can,

Are you in the markets or (still!!) watching from the sidelines?

-30% Aust. stocks
-30% in CFD account with 2 soft commodity bets on, the rest is waiting for shorting opps.
-30% cash

You?

Also, Nizar..its is ok if i PM you later in regards to system development ideas?

Cheers,

 

[nizar]

Also, Nizar..its is ok if i PM you later in regards to system development ideas?

Cheers,

Yeah feel free.
Im actually going to start a thread on this very soon.

 

[Temjin]

Do you have any evidence that our market follows the Chinese markets?
Or even the US?
Or that any of world financial markets follow China?

One day last week the SHanghai index fell 3.6% and nobody cared.

Well, the Feb correction was one. I really don't know why there were correlations between the global markets, but it seem the human panic does spread really quick and wide.

Because of that, I just can't ignore the possibility that if the Chinese stock market go under, the Australia market MAY be affected as well. It's all part of the big picture thinking that Dr Van Tharp encourages other to be aware of.

 

[>Apocalypto<]

Excellent article too bean, thanks for it.



I am afraid YOU are the one who DO NOT KNOW how the Chinese market works at all. Have you EVER been and through a market crash? Look at the tons of insight from independant experts out there. The evidences are so obvious.

To think the Chinese government have the slightest ability to resolve their current crisis is absolutely stupid.

After reading the article above, I have to full 100% agree with the author's insight. I am a Chinese myself and the way he describe the way of business in China and the culture is 110% true.

It's human nature to "get ahead", it's Chinese culture to "get rich", and when creating wealth through creating new businesses are severely restricted by "selected members" by satisfying corrupted officals, the only way to acquire wealth legimately is to INVEST.

Again like I said, those who hold a large portion of their portfolio in Australian stocks should seriously think about their position now and should start thinking of strategies to minimise the impact of the possible chinese bubble market crash.

Nizar is so right no one said boo the other day when Shanghia dropped read my first post, CHINA WAS A EXCUSE FOR THE US TO CORRECT after a 8 month trend!

one thing for you to do, with all your other bear buddy's, if your you're so scared stop trading and investing buy some property and stay the hell off the forums, i am sick to death of all you wanna be top calling doomsdayers!