China to Take Down World Financial Markets

[wayneL]

Lots of cognitive biases in here. (It's my term du jour )

Anyway FWIW another stoopid article (Sorry TI, it's a discussion forum, a mix of different ideas and views )

http://www.marketwatch.com/news/sto...x?guid={A504D285-9482-431B-BFDE-672C484030AF}

TODD HARRISON
Chinese food for thought
Commentary: Pay attention: The smart money in Asia is raising red flags
By Todd Harrison
Last Update: 11:16 PM ET May 22, 2007

"Sun-Tzu: If your enemy is superior, evade him. If angry, irritate him. If equally matched, fight, and if not, split and reevaluate."
Bud Fox, "Wall Street"
NEW YORK (MarketWatch) -- In the sixth century, "The Art of War" laid the groundwork for modern-day military strategy. Ironically, it may also be offering sage advice as we edge through the finest times in Chinese financial history.
In the past week, three prominent Far East figures have voiced concerns over the Shanghai ascent.
Li Ka-shing, the richest man in the region, said, "There's a bubble in the China stock market" and, "The high price to earnings ratio is reason to worry." He also cautioned investors against short-term speculation, saying, "They should have learned a lesson from the Asian financial crisis of 1997."
Merrill Lynch & Co.'s China chairman followed suit a few days later, noting that, "it's getting out of control," and, "investors should pare holdings," citing those very same valuations where prices are, on average, trading at 51 times earnings.
Finally, billionaire Lee Shau-kee, chairman of Henderson Land Development Co. (HK:12: news, chart, profile) , opined that Chinese shares trading on mainland markets are at an "unreasonable'' premium to those in Hong Kong, threatening to create "a bubble.''



Smart money, one and all, offering seasoned Chinese food for thought.
To be sure, holders in the region have plenty to digest on the heels of a rally that has tacked on 54% this year and 248% since the beginning of 2006.
There's nothing wrong with meteoric growth, mind you, particular for those savvy enough to have made that bet a few years ago. China is the motor that powers the world economic engine. It is, in many ways, what the United States used to be.
That's a blessing, but it may also portend a curse.
When I heard these comments, my mind meandered to the immortal words of Alan Greenspan, who first whispered "irrational exuberance" in 1996. He was prescient but early, missing the meat of the historic stateside blow-off.
That thought is a valid one, as the last phase of the denial-migration-panic trifecta is always the sharpest leg of any market move.
But perhaps there's serendipity or symmetry in the fact that Greenspan has now entered the private sector, placing his chips alongside Bill Gross at Pimco (AZ :
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AZ21.98, +0.05, +0.2% ) . It seems that everyone wants a piece of the pie, even if the crust is baked in China.
To wit, we've seen alliances emerge, such as Beijing's investment in Blackstone, that seemingly set the stage for a massive transfer of wealth. After all, if the world reserve currency continues to falter, as the U.S. dollar has to the tune of 30% since 2002, foreign accumulation of stateside assets is a logical and necessary progression.
The trick to this trade, from where I sit, is the way that it's postured to the public and executed in private. With foreign holders controlling the majority of our debt, they are, in theory, calling our fiscal and monetary shots.
Ben Bernanke and Hank Paulson are walking a tightrope, with nationalization on one side and isolationism on the other. A swift breeze from either side will bring imbalances to bear, which is precisely the reason that policy makers from both countries are currently meeting in Washington.
We know there is inflation in things we need to power, educate and feed the world and simultaneous deflation in discretionary items, consumed mostly by the debt-dependent U.S. consumer. The goal is orchestrate a gradual transition that allows for stable and sustainable coexistence.
Globalization isn't evil. Quite the contrary, it has allowed emerging markets to assume a larger role in the supply-demand equilibrium. For every action there is an equal an opposite reaction, however, and the other side of that trade is upon us.
The U.S. is no longer the dog that wags the world's tail. That role has been transferred to China and our collective fortunes rest in the decision making process of a foreign power. Again, there's nothing wrong with this as long as we remain aware and prepare ourselves in kind.
Most Americans are quick to dismiss the new world order for fear of being called unpatriotic. The rub is that the process of financial democratization is the very definition of capitalism, the same brand that we've been espousing and projecting for centuries.
I don't claim to know everything there is to know about China but I do know this. If there's one constant across borders and throughout time, it's the wisdom to pay attention to those in the know.
And when the smartest money in Asia is raising red flags, it behooves us all to respect the risk.
Todd Harrison is the founder and CEO of Minyanville.

 

[wayneL]

Greedscam gets in on the "China bubble to implode and spray all and sundry with poverty and misery" story.

http://www.marketwatch.com/news/sto...x?guid={22D96BFB-60A8-4D10-89E5-ED2E60D5175F}

Greenspan warns of big fall in Chinese stocks
By Polya Lesova
Last Update: 2:52 PM ET May 23, 2007

NEW YORK (MarketWatch) -- Former U.S. Federal Reserve Chairman Alan Greenspan warned Wednesday that there's going to be a "dramatic contraction" in Chinese equities and that the current surge on the Chinese stock market is unsustainable, according to media reports. In recent weeks, a number of financial firms, including Goldman Sachs, as well as Governor Zhou Xiaochuan of the People's Bank of China have expressed concern about the possibility of a bubble forming in the Chinese stock market. The Shanghai Composite Index, which tracks shares listed on the larger of China's two stock exchanges, has gained 56% year-to-date. End of Story

The bastid cost me a few bucks though! Ah WTF! It was worth it to see the Wall street crap itself for a millisecond. Bahahahahahaha!

 

[Temjin]

Lots of cognitive biases in here. (It's my term du jour )

Ah yeah, that's the word for it.

You know, I have been talking to my cousins in Hong Kong and plus read a few online posts from Chinese investors either directly or indirectly involved in the Chinese share market. My observation is that they tend to "DENY" the possibility of the bubble and/or the crash and they will tend to provide evidences which support their view and ignore others which counter them.

Hell, even one gave a reason that all these doomsday talk is the imperialist Amercians being jealous of the Chinese accomplisment thus far and making "bad omens" to their investments.

As a Chinese myself, I tend to believe that because we traditionally or culturally tend to ignore the negatives (i.e. If you claim someone else COULD die because of this or that, they will immediately attack you are being too negative and it's bad omen to say SUCH a thing, and you shouldn't be thinking or talking like this, etc, etc) Happens so much when I talk to my older chinese cousins and parents.

I think that's why the chinese people are more "irrational" than others might think, and also being more superstitious and optimistic about the future.

 

[CanOz]

Ah yeah, that's the word for it.

You know, I have been talking to my cousins in Hong Kong and plus read a few online posts from Chinese investors either directly or indirectly involved in the Chinese share market. My observation is that they tend to "DENY" the possibility of the bubble and/or the crash and they will tend to provide evidences which support their view and ignore others which counter them.

Hell, even one gave a reason that all these doomsday talk is the imperialist Amercians being jealous of the Chinese accomplisment thus far and making "bad omens" to their investments.

As a Chinese myself, I tend to believe that because we traditionally or culturally tend to ignore the negatives (i.e. If you claim someone else COULD die because of this or that, they will immediately attack you are being too negative and it's bad omen to say SUCH a thing, and you shouldn't be thinking or talking like this, etc, etc) Happens so much when I talk to my older chinese cousins and parents.

I think that's why the chinese people are more "irrational" than others might think, and also being more superstitious and optimistic about the future.

The SSE opened up, still trying to get the latest....looks like its off a little over 1% so far.

Can someone check this for me...the Inet here is so crappy i can't even the load the bloody page!

Cheers,

http://www.sse.com.cn/sseportal/en_us/ps/home.shtml

 

[Kauri]

The SSE opened up, still trying to get the latest....looks like its off a little over 1% so far.

Can someone check this for me...the Inet here is so crappy i can't even the load the bloody page!

Cheers,

http://www.sse.com.cn/sseportal/en_us/ps/home.shtml

Latest..

 

[KIWIKARLOS]

Shanghai Composite 4,139.873 10:45PM ET 33.836 (0.81%) Chart, More
^HSI Hang Seng 20,798.97 5:59AM ET 44.95 (0.22%) Components, Chart, More
^BSESN BSE 30 14,363.26 6:28AM ET 0.00 (0.00%) Chart, More
^JKSE Jakarta Composite 2,084.4641 11:15PM ET 19.782 (0.94%) Components, Chart, More
^KLSE KLSE Composite 1,354.98 5:02AM ET 12.53 (0.92%) Components, Chart, More
^N225 Nikkei 225 17,686.35 10:30PM ET 18.77 (0.11%) Chart, More

ALL DOWN

I hate it when greenspan talks

Not to horendous yet, hopefully everyone will forget about it tommorow.
ASX a sea of red today im lucky the only three im holding are even or up

 

[KIWIKARLOS]

Europe is the opposite everything up the Dax over 1%

 

[Kauri]

Europe is the opposite everything up the Dax over 1%

The DAX will probably come down tonight...
They might have already closed when Green Peas 'n Ham set off his sneaky dirty bomb last night??

 

[hangseng]

The DAX will probably come down tonight...
They might have already closed when Green Peas 'n Ham set off his sneaky dirty bomb last night??

US will go up tonight. Greenspan is very clever indeed, watch the money flow from China and back into the US markets. His plan all along, he speaks the markets listen. Arguably far too much power for one person to yield.

This is not a meltdown, so make wise decisions.

 

[KIWIKARLOS]

yeah i dont think china will end the day down more than 1% i reakon about 0.5-0.7 %

If greenies predictions come true what exactly will happen.

1. Chinas massive correction: Millions of chinese lose their savings and that has little flow on effect because the major consumers are America and europe anyway? Perhapes china pumps cash in from reserves to lessen the load. How could this effect chinas development, from what i understand its growth isn't fuelled by consumption but rather industrial growth which may take a hit but surely other countries would see a big decrease in the market as a opportunity to buy?

2. World asset prices decrease: Does this mean everyones house price decreases along with company values etc so a house you bought yesterday for 200 K is now worth 150K, basically everything drops?

 

[purple]

I think that's why the chinese people are more "irrational" than others might think, and also being more superstitious and optimistic about the future.

hmm...maybe. they had a 5 year bear market just before the magnificent 06 run. so they were being highly irrational and avoiding the market for all they're worth.

over here in the Arab markets, it's been a 1 1/2 year bear market. but the Gulf economies have been powering upwards strongly. it's the herd mentality, which is a very strong societal hegemony.

 

[Kauri]

Paulson and Wu Yi meet over trade issues between China and U.S. Despite the smiles and never-ending handshake after the meetings nothing to help the struggling $US and hence trade deficit has been achieved. Hardly has the last press photo been taken that the US, realising that it no longer has the financial or military clout to influence China, trundle out "at arms length" Green Peas 'n Ham to show the Chinese that with a few mild words they can still potentially influence China's economy.... implying that with stronger wording, if needed, etc......
No not really, it was just one of those politically advantageous co-incidences that seem to happen all too frequently.....
Business as usual after the US long weekend??

 

[Kimosabi]

Another exponential chart - too scary for words .

NEW YORK (MarketWatch) -- China's booming A-share market could turn into a bubble if speculation among exuberant domestic retail investors is not curbed, Goldman Sachs warned Thursday, as the Shanghai Composite Index hit yet another intraday record high.
"Market trading statistics, liquidity indicators, and anecdotal evidence all point to optimistic, if not exuberant, sentiment in the domestic market," said Thomas Deng, analyst at Goldman Sachs, in a Thursday research report.
"As speculation continues to be nurtured among domestic retail investors, we see genuine risks of market euphoria materializing if regulators fail to step up their efforts to contain market irregularities," Deng said.
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.

Remember this chart from earlier in this thread.

Well the Shanghai SE Composite Index blasted through 4231 to finish at 4272 today. This is going to be very interesting to watch from here on in...

 

[Kauri]

Todays West Australian...........
Chinese zoom in on hot stocks


29th May 2007, 8:30 WST

Chinese investors yesterday shrugged off growing warnings of a stockmarket bubble by pushing shares to a fresh all-time high yesterday.

The benchmark CSI 300, which measures China’s two exchanges, climbed 2.2 per cent to breach 4000 points. The Shanghai composite index cracked 4200 for the first time on record turnover of 261.1 billion yuan ($41.9 billion).

The CSI 300 index has now risen 206 per cent over the past year as new investors pile into stocks in pursuit of higher returns.

Latest records show 362,719 brokerage accounts were opened in China on May 24, the fifth straight day the tally has exceeded 300,000. So far this year, 20.9 million accounts have been opened, four times the amount in 2006.

Last week, former Federal Reserve chairman Alan Greenspan warned of a “dramatic contraction” by the Chinese stockmarket.
SHANGHAI

 

[Kimosabi]

Todays West Australian...........
Chinese zoom in on hot stocks


29th May 2007, 8:30 WST

Chinese investors yesterday shrugged off growing warnings of a stockmarket bubble by pushing shares to a fresh all-time high yesterday.

The benchmark CSI 300, which measures China’s two exchanges, climbed 2.2 per cent to breach 4000 points. The Shanghai composite index cracked 4200 for the first time on record turnover of 261.1 billion yuan ($41.9 billion).

The CSI 300 index has now risen 206 per cent over the past year as new investors pile into stocks in pursuit of higher returns.

Latest records show 362,719 brokerage accounts were opened in China on May 24, the fifth straight day the tally has exceeded 300,000. So far this year, 20.9 million accounts have been opened, four times the amount in 2006.

Last week, former Federal Reserve chairman Alan Greenspan warned of a “dramatic contraction” by the Chinese stockmarket.
SHANGHAI

My greatest concern if the Chinese Stock Market goes POP, is what will the social implications be for the Chinese Government.

People can go a little crazy when they loose all their life savings and the money they have borrowed as well.

I think the US is going to try and crash the Chinese Stock Market and Economy.

 

[KIWIKARLOS]

i agree, the question is if their market collapses will all the investment then flow into other world markets namely US and europe.

since Chinas economy is production based and not demand based surely it can't effect other markets to much

 

[Sean K]

We might feel a ripple this afternoon. Will be interesting to see how we fare.

1004 [Dow Jones] Trader at international investment bank says reaction of Chinese shares to overnight news that China will triple stamp duty on share trades to 0.3% will be closely watched when they open at 0130 GMT for expected negative reaction, which could also weigh on regional bourses and could also be precursor to further contractionary measures. "They're really worried about the market over there overheating, so they might take other steps, that's the risk, says trader. Says with few other major drivers on relatively flat outlook for market, fears of Chines slow down could weigh on S&P/ASX 200, particularly mining stocks. (WEL)

Shorting up anyone?

 

[Kimosabi]

I think it's going to take more this to stop them...

 

[nizar]

Yeh Kennas.
China raise their stamp duty.

LAst time they did this in 1992 and 1997 it triggered major correction.
But in those days, i wonder how much brokerage accounts were opening each day?

Yesterday alone 455,000 in China (according to Craig JAmes on Sky news this morning).
20million this year.

Maybe its another 3.4% down day in China where nobody else cares?

 

[CanOz]

Yeh Kennas.
China raise their stamp duty.

LAst time they did this in 1992 and 1997 it triggered major correction.
But in those days, i wonder how much brokerage accounts were opening each day?

Yesterday alone 455,000 in China (according to Craig JAmes on Sky news this morning).
20million this year.

Maybe its another 3.4% down day in China where nobody else cares?

They need these little dips if they're going to continue on for any length of time.

They really don't give a toss about how parabolic it is, they keep saying to me, "but this market is different this time".

As long as there is money to go into it, i think it will keep rising.

Cheers,



(SSE is recovering now, opened down 3%, now only 2% down. This things like a rubber band!)