Liberty Posted July 9, 2015 Share Posted July 9, 2015 The loss in Chinese equities is already measured in trillions. Shanghai's still up 70% TTM, so I guess the gains are in the trillions too. No idea how it'll all end... Sure, but 1987 was similar though U.S. stocks weren't up nearly as much as China is now. The stock market ended in the green, though it took it more than 2 years to regain its highs. I guess a one day drop of 22% is still enough to put you up there with the best of financial crisis regardless of that the 12 month rolling return was. That being said, stock markets all around the world crash on that day. Many by more than the U.S. I wouldn't have expected that type of market correlation back in the day, nor am a familiar enough to know what caused it, but I certainly don't think world equities will be insulated this time around either. My point was just that you can't look at the losses without also looking at the gains, and that sometimes it's important to zoom out a bit and keep things in perspective. Link to comment Share on other sites More sharing options...
hillfronter83 Posted July 9, 2015 Share Posted July 9, 2015 As reported recently, more Chinese are following Buffett and Munger. That's a good thing and I believe will be absorbed broadly there. I doubt this is true. By my observation, Buffett is not popular among professionals since people want to get rich quick. And most of the investors are retail investors who probably never heard about Mr. Buffett. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted July 9, 2015 Share Posted July 9, 2015 In China I imagine that eventually reality will hit and people will realize that they may be in trouble and that the higher-ups will only be bailing out their friends (strategic alliances) and not the little guys. People already realize this. They just thought they could front-run the other suckers. Can you give us your perspective of the Chinese market/economy? You have a unique perspective relative to the rest of the board. Link to comment Share on other sites More sharing options...
yadayada Posted July 9, 2015 Share Posted July 9, 2015 Chinese tourists are notorious. I think there was a problem a while ago with people taking shits in the halls of museums in Egypt if there was a line in front of the toilets. There are lot's of amusing horror stories if you search for them. A lot of them behave like complete uncivilized pigs. Chinese government had to issue a press statement that this behavior was unacceptable. Straight from the countryside and Mao's era. And a lot of these idiots just discovered the stock market! still buying stocks at 100x earnings lol. And to think that a lot of these stocks are frauds. At least the dotcom bubble had somewhat of a legit reason behind it (an exciting new technology). But if you look at the stats, you see this will not have much of an impact, since stocks are a smaller % of household networths. And household leverage is low, and total value of Chinese stock market is much lower as a % of GDP then western countries (like 35% vs 100% of developed?). And like Liberty said, stocks are still higher then before. Still think that because labor is more then 5x cheaper then in the west, there is room to grow. They are improving in a lot of area's that will boost economy (rule of law, corruption, infrastructure, education). Jinping gets it. If you think they are like Japan, Japan's workers were more expensive then the US when it crashed! GDP per capita higher etc. China's labor more then 5x cheaper then US. And more then twice as cheap then South korea I think. Chinese GDP can easily grow another 50% in the next 10 years. Macroeconomics between countries seems to be a lot like valueinvesting in some ways. Link to comment Share on other sites More sharing options...
Parsad Posted July 10, 2015 Share Posted July 10, 2015 Chinese tourists are notorious. I think there was a problem a while ago with people taking shits in the halls of museums in Egypt if there was a line in front of the toilets. There are lot's of amusing horror stories if you search for them. A lot of them behave like complete uncivilized pigs. Chinese government had to issue a press statement that this behavior was unacceptable. Straight from the countryside and Mao's era. And a lot of these idiots just discovered the stock market! still buying stocks at 100x earnings lol. And to think that a lot of these stocks are frauds. At least the dotcom bubble had somewhat of a legit reason behind it (an exciting new technology). I just came from China a week ago, and I saw nothing of the sort! In fact, I think every one with any such ignorant view of China needs to make a trip to get their facts straight. You'll be surprised exactly how quick this population has taken to capitalism and how sophisticated their country is becoming in short order. Yes, they will hit a wall, but just like the United States before the Great Depression, the world should have taken note on who was about to dominate the next 70 years! In terms of online boorish behaviour, China has over 1.6B people and counting...you are going to get idiots doing stupid things. How many videos are there of pig-like U.S. Walmart customers, yet that is a subsection of the subsection of the shopping base at Walmart. What I saw was mind-boggling in China, and if anyone thinks that Shanghai isn't the #2 money centre in the world already, should simply go stand on the Bund in Shanghai at night and look at Pudong across the river. Then, you will realize exactly what China is and how the people there are no different than the ones here...they want to take care of their family, they want a better life, they want to be comfortable and happy. Cheers! Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 As reported recently, more Chinese are following Buffett and Munger. That's a good thing and I believe will be absorbed broadly there. I doubt this is true. By my observation, Buffett is not popular among professionals since people want to get rich quick. And most of the investors are retail investors who probably never heard about Mr. Buffett. Buffett is very popular. The most popular fundamental retail investor forum is called "The Snowball" (雪球网), after all! But many Chinese, even people who are educated and intelligent, will read Buffett and Munger and Lynch and then conclude, well, fundamental analysis works in the West, but not in China. In China, they'll say, you have to invest based on government policies. Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 Chinese tourists are notorious. I think there was a problem a while ago with people taking shits in the halls of museums in Egypt if there was a line in front of the toilets. There are lot's of amusing horror stories if you search for them. A lot of them behave like complete uncivilized pigs. Chinese government had to issue a press statement that this behavior was unacceptable. Straight from the countryside and Mao's era. And a lot of these idiots just discovered the stock market! still buying stocks at 100x earnings lol. And to think that a lot of these stocks are frauds. At least the dotcom bubble had somewhat of a legit reason behind it (an exciting new technology). I just came from China a week ago, and I saw nothing of the sort! In fact, I think every one with any such ignorant view of China needs to make a trip to get their facts straight. You'll be surprised exactly how quick this population has taken to capitalism and how sophisticated their country is becoming in short order. Yes, they will hit a wall, but just like the United States before the Great Depression, the world should have taken note on who was about to dominate the next 70 years! In terms of online boorish behaviour, China has over 1.6B people and counting...you are going to get idiots doing stupid things. How many videos are there of pig-like U.S. Walmart customers, yet that is a subsection of the subsection of the shopping base at Walmart. What I saw was mind-boggling in China, and if anyone thinks that Shanghai isn't the #2 money centre in the world already, should simply go stand on the Bund in Shanghai at night and look at Pudong across the river. Then, you will realize exactly what China is and how the people there are no different than the ones here...they want to take care of their family, they want a better life, they want to be comfortable and happy. Cheers! Looks like you had a great trip here! Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 In China I imagine that eventually reality will hit and people will realize that they may be in trouble and that the higher-ups will only be bailing out their friends (strategic alliances) and not the little guys. People already realize this. They just thought they could front-run the other suckers. Can you give us your perspective of the Chinese market/economy? You have a unique perspective relative to the rest of the board. I know just enough to know that I don't know enough to have a strong opinion one way or the other, but also that the strong opinions that most hold (whether Chinese or not) are completely unfounded and based on insufficient evidence. Things are ok here. I know and/or have spoken to (in Chinese) people from a big cross-section of society, from entrepreneurs to professionals to blue-collar workers, and in many geographic regions. (And yet I realize that is still far more biased and far too little of a sample size to say anything conclusive.) The frustrations of living here remain and will not go away anytime soon. But life goes on, and society is generally stable. And of course, things are generally better for far more people than not than they were 5 years ago and 10 years ago. Link to comment Share on other sites More sharing options...
Liberty Posted July 10, 2015 Share Posted July 10, 2015 http://goinglongblog.com/decoding-chinas-swoon-its-impacts/ Interesting read. What do you think, Inner Scorecard? Another interesting take on China’s market: http://scottgrannis.blogspot.ca/2015/07/china-stock-crash-index-up-only-72-in.html Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 http://goinglongblog.com/decoding-chinas-swoon-its-impacts/ Interesting read. What do you think, Inner Scorecard? Another interesting take on China’s market: http://scottgrannis.blogspot.ca/2015/07/china-stock-crash-index-up-only-72-in.html One thing that was interesting to me was the statistic of how many trading accounts were open - Solomon said less than 100 million accounts. I remembered previously seeing Credit Suisse saying there were 258 million accounts open, so this struck me as interesting. Something was lost in translation somewhere. It's never something I had researched before. So I went to the website of China Securities Depository and Clearing, where they say there are 90.9m investors - as opposed to accounts - multiple accounts are allowed now - as of last count (90.7m of which are individuals). 89.9m of these are in A shares (2.4m are in B shares). Of these, 30.2m transacted during the most recent weekly period for which there is data available (6/29 to 7/03). (Only 0.3m transacted in B shares.) So if you're going to see an immediate negative wealth effect, it might mostly be for these 30 million or so active traders. Website (Chinese only) is here: http://www.chinaclear.cn/zdjs/xmzkb/center_mzkb.shtml. Link to comment Share on other sites More sharing options...
hillfronter83 Posted July 10, 2015 Share Posted July 10, 2015 But many Chinese, even people who are educated and intelligent, will read Buffett and Munger and Lynch and then conclude, well, fundamental analysis works in the West, but not in China. In China, they'll say, you have to invest based on government policies. There is zero trust regarding public filing and insider trading is very common. That's why people (including myself) don't rely on western style fundamental analysis. It is very important that you do you due diligence on the target company, similar to a venture capitalist would have done to a startup. My brother in law, who once was a CFO for a HK traded company told me company can even fake cash balance in its bank (not unreasonable if you think that both bank head and company head are appointed government officials). And we are talking about one of the big four as its auditor. Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 But many Chinese, even people who are educated and intelligent, will read Buffett and Munger and Lynch and then conclude, well, fundamental analysis works in the West, but not in China. In China, they'll say, you have to invest based on government policies. There is zero trust regarding public filing and insider trading is very common. That's why people (including myself) don't rely on fundamental analysis. Right - I'm not saying people should naively adopt Western-style fundamental analysis, either. I'm just saying what I believe the consensus more or less to be. The other possible way to think about the problem, assuming fundamental analysis was impossible or useless, would be that if you cannot perform fundamental analysis, you cannot invest at all, rather than that you must invest in a more speculative fashion. No one has to enter the domestic securities market. One can always choose not to participate (although seemingly, you cannot easily choose to get out once you are in!). Link to comment Share on other sites More sharing options...
hillfronter83 Posted July 10, 2015 Share Posted July 10, 2015 But many Chinese, even people who are educated and intelligent, will read Buffett and Munger and Lynch and then conclude, well, fundamental analysis works in the West, but not in China. In China, they'll say, you have to invest based on government policies. There is zero trust regarding public filing and insider trading is very common. That's why people (including myself) don't rely on fundamental analysis. Right - I'm not saying people should naively adopt Western-style fundamental analysis, either. I'm just saying what I believe the consensus more or less to be. The other possible way to think about the problem, assuming fundamental analysis was impossible or useless, would be that if you cannot perform fundamental analysis, you cannot invest at all, rather than that you must invest in a more speculative fashion. No one has to enter the domestic securities market. One can always choose not to participate (although seemingly, you cannot easily choose to get out once you are in!). Sorry, I editted my post. Basically investors are responsbile for their own money and they have to do extensive due diligence. This would be hard for anyone not have a presence within China. There are great investment opportunities in China for those have the ability, as demonstrated by BYD etc. Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 I completely agree with everything you said. And even having a presence in China doesn't guarantee that either, of course. It's necessary but not sufficient. I've seen big institutions, supposedly the smart money, being taken for a ride in really funny ways. People simply don't do the proper due diligence, especially when they have increasing risk appetite. Link to comment Share on other sites More sharing options...
hillfronter83 Posted July 10, 2015 Share Posted July 10, 2015 increasing risk appetite. You mean greed? lol. Link to comment Share on other sites More sharing options...
Guest ajc Posted July 10, 2015 Share Posted July 10, 2015 Anyone investing in China should read Tim Clissold's Mr. China in order to see what they're up against. He helped run $400 million worth of PE money there in the 90's and 00's and the book gives detailed descriptions of the troubles they faced. Also, there are about 3 or 4 video's of Cheah Cheng Hye (Value Partners CEO, Hong Kong) on YouTube which are all worth watching. In them, he partly describes their investment research process for firms from the mainland. Basically, they send people out who use investigative journalism techniques where they question suppliers, former employees, count trucks coming out of the factories, and so on, before they're prepared to put a stock into one of their funds. Link to comment Share on other sites More sharing options...
HJ Posted July 10, 2015 Share Posted July 10, 2015 Think US in the roaring 20's before the SEC. Bucket shop, Ponzi schemes, Stock manipulations, think what Daniel Drew did to Vanderbilt. Minority investor protection is a fairly modern concept even in the US. There is a reason why in China, real estate is the preferred mode of wealth preservation, not stocks. Link to comment Share on other sites More sharing options...
Jurgis Posted July 10, 2015 Share Posted July 10, 2015 Basically, they send people out who use investigative journalism techniques where they question suppliers, former employees, count trucks coming out of the factories, and so on, before they're prepared to put a stock into one of their funds. Which is definitely illegal for foreigners and possibly illegal even for natives (depending on the company I guess). Link to comment Share on other sites More sharing options...
innerscorecard Posted July 10, 2015 Share Posted July 10, 2015 Asking questions is not illegal. Asking questions stupidly can get you into trouble. Link to comment Share on other sites More sharing options...
LongHaul Posted July 13, 2015 Share Posted July 13, 2015 The Chinese love to gamble. First is was real estate then when real estate prices in China declined people jumped on the stock market. It's striking that the Chinese are such wonderful savers then allocate their capital to bubbles. Link to comment Share on other sites More sharing options...
DeepSouth Posted July 13, 2015 Share Posted July 13, 2015 The Chinese love to gamble. First is was real estate then when real estate prices in China declined people jumped on the stock market. It's striking that the Chinese are such wonderful savers then allocate their capital to bubbles. These are the natural results of the Asian development model where a financially repressive government forces savings up and mainly drives them into low interest rate bank deposits. See Michael Pettis' writing for deeper discussion. Link to comment Share on other sites More sharing options...
HJ Posted July 13, 2015 Share Posted July 13, 2015 The Chinese love to gamble. First is was real estate then when real estate prices in China declined people jumped on the stock market. It's striking that the Chinese are such wonderful savers then allocate their capital to bubbles. There is probably some truth to that, just witness all the Asian faces in US casinos. But when we are talking about such huge amount, I think it is more reflective of the extraordinary money printing that has gone on in China, and the fact that there is no credible way of "preserving" these perceived wealth. I was in conversation with a local business man who owns a meaningful amount of his own stock. Going into the peak, he sold some, but not all, not even majority of his stocks. When I asked him why he didn't just sell it all, since by his own admission he knows the stock market is getting out of hand, the answer was "but where am I going to put the cash?" Now he's a very wealthy man just on what he sold, but as long as he's reluctant to move his capital out of RMB denomination, there's simply not much he can do to preserve his paper wealth. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted July 14, 2015 Share Posted July 14, 2015 Interesting insight. From what I've read, currency controls of the RMB make it illegal (or at least a large fine) for removing RMB from the country, holding USD over a certain amount, and the fear of where to keep $ is very real as demand deposit insurance only started in April or May of this year and is not as comprehensive as the US version. Investing overseas is also difficult due to the reporting for the Chinese (again, from what I've read). Link to comment Share on other sites More sharing options...
valueorama Posted July 16, 2015 Share Posted July 16, 2015 I thought RMB was fully convertible with Singapore dollar. Once you go into singapore dollar, i am assuming on can convert to USD. Link to comment Share on other sites More sharing options...
leeway Posted July 16, 2015 Share Posted July 16, 2015 I thought RMB was fully convertible with Singapore dollar. Once you go into singapore dollar, i am assuming on can convert to USD. I doubt this is true. Since last year SGD can directly trade with RMB (no need to be quoted through USD etc), which is far from full convertibility. http://www.ibtimes.co.uk/china-picks-singapore-dollar-ninth-currency-directly-trade-against-yuan-1471916 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now