China to Take Down World Financial Markets

[professor_frink]

AORD barely drop just a little over 1% today, another evidence to the positive correlations between global markets.

What time was the news about the increase in stamp duty?

 

[>Apocalypto<]

What time was the news about the increase in stamp duty?

I read it this morning before we opened Frink.

 

[Gundini]

What time was the news about the increase in stamp duty?

I think it was actually Midnight China local time. The market opened up 6% down, and currently 5.42% after touching the 7's briefly.

 

[Kauri]

I think the reaction to the 0.2% increase in stamp duty will be a short-lived temporary psychological set-back... the gambling spirit will quickly re-assert itself, after all what monetary effect will a 0.2%.(0.4% round trip??) tax really have, when the participants have seen the market making 2..3..4.. or even 5% daily. Fundementally, economically, and confidence-wise the outlook for China hasn't changed at all. All it will take is a few punters to jump back in and the rest will be frightened that they will be left behind. Then again, maybe not..
The next move a bit further down the track to cool the market... talk of a capital gains tax on shares maybe???
I love this game...

 

[professor_frink]

I think it was actually Midnight China local time. The market opened up 6% down, and currently 5.42% after touching the 7's briefly.

Cheers Gundini.


Interesting. Confirms what I'm seeing on the charts presently- The DOW is following the nikkei South. Making today pretty well business as usual.

 

[PeterPan]

That’s actually what scares me the most. Someone says that US tried with the bird flu a couple of years ago … they might try with making the share market crash this time around!

Anyway, I believe the problem is not the Chinese market but rather the other markets/investors. What I mean by this is that, if you take what’s happened today as an example, where the market in China has gone down nearly 7% for the measure imposed by the government and all the Asian markets more or less has followed suit (and most probably European and US markets will as well) without reason (because the stamp duty tax has not been increased in these other markets), you will agree with me that it’s only us (aussie, americans, Europeans, Japanese and Asians investors in our own markets) that can spark a global crisis.

Can someone please explain to me the reason why the All Ords had to lose 70 points today following a restrictive measure (please note, stamp duty tax!) adopted in China??? Does that measure affect the rest of the world as well? I don’t think so! Are we becoming all prima donna and want to be involved in the making of the world economy? Yes, I think so!!!

In other words, what may happen in my opinion is that the Chinese market suffers a blow for something not related to its economy (still performing very well), the world markets instead of ignoring this (the Chinese economy is still very much OK and if someone has lost money is not the end of the world because share ownership is still minuscule in China and won’t be able to slow down the economy) plunge as well, the world investors lose money (because to the contrary of what happens in China, share ownership is widespread in the rest of the world), the world economy has a crisis, a big crisis. Why? Because the Chinese government has adopted a restrictive measure to cool down its SM!!!! That’s ridiculous!!!!

We’ve got to think with our head when we invest and consider what really may trigger a world crisis. That’s all!!

The only reason why there could be an economic crisis is because we want it! Not because the Chinese economy is ill!!!!

Cheers
PeterPan

 

[barnz2k]

interesting thread! just read through a bunch of it. I can understand both views and the concerns of a china crash bringing down AUS amongst others..

Im curious if anyone on ASF is actually investing in the China market right now? Is it even possible for non-chinese?

 

[CanOz]

interesting thread! just read through a bunch of it. I can understand both views and the concerns of a china crash bringing down AUS amongst others..

Im curious if anyone on ASF is actually investing in the China market right now? Is it even possible for non-chinese?

Funds like the China Growth Fund are able to invest through the B Shares i believe.

 

[KIWIKARLOS]

China doesn't drive markets though.

Countries like USA and europe which are huge consumers drive the demand, china simply makes the stuff. Its not like the factories will close if the market goes down?

With consumer sentiment still high around the world what is the worst that could happen?

Alot of ordinary chinese stand to loose money but if you've been to star city and time lately you'll know that they'll just move onto the next table and try again.

:

 

[greggy]

I think it was actually Midnight China local time. The market opened up 6% down, and currently 5.42% after touching the 7's briefly.

The Chinese market has had a stellar year thus far and is using any excuse to have a much needed correction. I'm not surprised, but I'm not worried either.
DYOR

 

[Kimosabi]

That’s actually what scares me the most. Someone says that US tried with the bird flu a couple of years ago … they might try with making the share market crash this time around!

Anyway, I believe the problem is not the Chinese market but rather the other markets/investors. What I mean by this is that, if you take what’s happened today as an example, where the market in China has gone down nearly 7% for the measure imposed by the government and all the Asian markets more or less has followed suit (and most probably European and US markets will as well) without reason (because the stamp duty tax has not been increased in these other markets), you will agree with me that it’s only us (aussie, americans, Europeans, Japanese and Asians investors in our own markets) that can spark a global crisis.

Can someone please explain to me the reason why the All Ords had to lose 70 points today following a restrictive measure (please note, stamp duty tax!) adopted in China??? Does that measure affect the rest of the world as well? I don’t think so! Are we becoming all prima donna and want to be involved in the making of the world economy? Yes, I think so!!!

In other words, what may happen in my opinion is that the Chinese market suffers a blow for something not related to its economy (still performing very well), the world markets instead of ignoring this (the Chinese economy is still very much OK and if someone has lost money is not the end of the world because share ownership is still minuscule in China and won’t be able to slow down the economy) plunge as well, the world investors lose money (because to the contrary of what happens in China, share ownership is widespread in the rest of the world), the world economy has a crisis, a big crisis. Why? Because the Chinese government has adopted a restrictive measure to cool down its SM!!!! That’s ridiculous!!!!

We’ve got to think with our head when we invest and consider what really may trigger a world crisis. That’s all!!

The only reason why there could be an economic crisis is because we want it! Not because the Chinese economy is ill!!!!

Cheers
PeterPan

Oh, it get even better, guess who bought $110 billion of America's soon to be worthless Mortgage Backed Security's that funded the US's housing boom?

“In 2002, Chinese investors owned about $100 million in U.S agency MBS. Now they own well over $110 billion, a nearly 1,000-fold increase in less than five years.”

http://thehousingbubbleblog.com/?p=2869

The US housing bust is going to have worldwide implications, because the rest of the world funded it.

This is like a Massive Westpoint/Fincorp Property Investment Scheme etc, backed by over-valued property. The only problem is the United States Property Investment Rip-off scheme has grown to approx $4.5 Trillion dollars of Mortgage Debt in just 6 years, and much of the funding came from asia, and I guarantee the Overseas Investor's won't ever get their money back.

 

[Gundini]

I agree with PeterPan's post, I was going write something similar but couldn't work out how to say it, but you have mirrored my thoughts...

And the question again is why do we all catch a cold when China sneezes, especially when it's not related to their economy? You could hardly call a change in tax from 1% to 3% a massive deal... And their market off 6.5% so far.

Yet our market reacts like it directly affects them... and comes off 70 pts.

And should the DOW follow suit? Why should it? But it may come off in sympathy... Then again, the S&P500 is around 6 points from a massive double top... Interesting to see how it pans out.

 

[KIWIKARLOS]

So America is exporting its dodgy morgage debt and infaltion mostly to China.

If 5h!t does hit the fan in the US the only people losing out is China, lets say their economy collapses and maufactoring slows down, wouldn't it simply shift back to US and others where it has been migrating from for years.

If you ask me China has been compounding this problem by undervaluing is currency.

I don't think the fallout from any US or China problems will hit Australia as hard, sure we might have a recession but i can't see a collapse?

 

[Kimosabi]

So America is exporting its dodgy morgage debt and infaltion mostly to China.

If 5h!t does hit the fan in the US the only people losing out is China, lets say their economy collapses and maufactoring slows down, wouldn't it simply shift back to US and others where it has been migrating from for years.

If you ask me China has been compounding this problem by undervaluing is currency.

I don't think the fallout from any US or China problems will hit Australia as hard, sure we might have a recession but i can't see a collapse?

It just so happens, Asia paid for much of America's War in Iraq as well.

I hope the this is the link to the US economist who made this statement ==>
http://www.michael-hudson.com/audio/061208HudsonRealEstates.mp3

The more pieces of this Jigsaw Puzzle I put together, the worse it gets.

 

[Kimosabi]

It just so happens, Asia paid for much of America's War in Iraq as well.

I hope the this is the link to the US economist who made this statement ==>
http://www.michael-hudson.com/audio/061208HudsonRealEstates.mp3

The more pieces of this Jigsaw Puzzle I put together, the worse it gets.

The "Asia paid for much of America's War in Iraq" quote is a bit after 47:30

 

[CanOz]

I You could hardly call a change in tax from 1% to 3% a massive deal...

It was actually even less than that! It was an increase in stamp duty from .1 to .3%....how crazy is that....so if you sold a parcel of shares worth 100,000 Yuan Renmimbi, you would have to pay an extra 200 Y.

I really think they're just trying to create a small panic to scare out the couple of hundred million speculators!

Everything just boggles my mind about China...

Cheers,

 

[disarray]

Oh, it get even better, guess who bought $110 billion of America's soon to be worthless Mortgage Backed Security's that funded the US's housing boom?

heh the americans are undisputed capitalist masters of the world. from making a killing during the wars to screwing the saudis out of their oil, and now the chinese have fallen for it. /golfclap.

 

[purple]

Everything just boggles my mind about China...
,

Hey CanOz, you're the ASF China correspondent for all of us here, since you're in the land itself!! just remember to post something if you see people jumping out of their windows LOL.

apart from holding a few China H-shares which are supposedly 'heavyweights' but have been in the red ever since, I have only been watching the China market, not wanting to get back in quickly.

 

[CanOz]

Hey CanOz, you're the ASF China correspondent for all of us here, since you're in the land itself!! just remember to post something if you see people jumping out of their windows LOL.

apart from holding a few China H-shares which are supposedly 'heavyweights' but have been in the red ever since, I have only been watching the China market, not wanting to get back in quickly.

no worries, i'll keep a look out!...errr up.

 

[TjamesX]

I've been watching the Chinese market closely for the last couple of months.... been interesting to say the least. I very much think it could be a catalyst. 2 years ago it would've been insignificant, but now the number of people and amount of money involved is enough to cause problems (US $53 billion traded just today);

My Observations:

- The government increased the stamp duty to scare people away from the market
- Comments form greenspan about a 'bubble' did not effect the market, it took the govt to take action before the market listened
- After the 9% correction earlier this year the market has risen another 43% and would have to fall 30% to go back to the levels when the original correction occured
- At a forward PE of 48 (before today), based on PE analysis alone - the market could fall 50-60% before value investors would even consider entering
- Chinese workers are only given 3% on bank account deposits so there is no incentive to save
- Inflation is running above the deposit rate, so creating a flight to assets at any price

http://www.bloomberg.com/apps/news?pid=20601087&sid=aov7tk7g9L9A&refer=home

Interesting quotes;

About 10 percent of maids in Shanghai resigned because they made more money trading shares

Some 22 million accounts have been opened at brokerages so far this year, four times the amount in all of 2006

Should be interesting tomorrow - but I reckon its gonna go up for a bit longer

TJ