China Economic News

On the stock market itself, the recent run up in A-Shares mirrors the performance of the index in 2006. So coincidence that it's about 10-years apart. Within a year after Lehman's bankrupt, the A-Shares value eroded nearly 100% of the bull run since 2006.

(14-04-2015, 04:49 PM)valuebuddies Wrote: On the stock market itself, the recent run up in A-Shares mirrors the performance of the index in 2006. So coincidence that it's about 10-years apart. Within a year after Lehman's bankrupt, the A-Shares value eroded nearly 100% of the bull run since 2006.

Yes unfortunately history is gonna repeat itself. Just like what happended in Japan two decades ago, many in china are just too greedy after their easy gains in property investment, they are now moving into stocks investment, thinking it is another sure win.

Thing about stocks is that it is easy and fast to go up, it is also very easy and fast to go down. Add on leverage and when kena margin call, its very jialat

SSE has run for about half year liao, HKSE just started running. Give it another half year, we shall see something spectacular.

I am vested in the A-share tracker, I rode from IPO price of $2.50 to low of $1.40 and now back to nearly $3.00. It's nice that I started to make some profit after holding this bloody thing for more than 5 years I think, but the trend is indeed worrying. It is true that someone has told me years ago, when China property market in gloom, China shares will be in boom. It is just another cycle but I have a gut feeling that A-shares will go beyond 6,000 marks by end of the year.

(16-04-2015, 10:21 AM)valuebuddies Wrote: I am vested in the A-share tracker, I rode from IPO price of $2.50 to low of $1.40 and now back to nearly $3.00. It's nice that I started to make some profit after holding this bloody thing for more than 5 years I think, but the trend is indeed worrying. It is true that someone has told me years ago, when China property market in gloom, China shares will be in boom. It is just another cycle but I have a gut feeling that A-shares will go beyond 6,000 marks by end of the year.

I concur on the "feeling".

Most foreign fund managers are still standing-by on the sideline on the SH-HK direct-link. The issues on the north-bound trade, will diminish over time, and more fund will flow-in via the link eventually

(16-04-2015, 10:34 AM)CityFarmer Wrote:

(16-04-2015, 10:21 AM)valuebuddies Wrote: I am vested in the A-share tracker, I rode from IPO price of $2.50 to low of $1.40 and now back to nearly $3.00. It's nice that I started to make some profit after holding this bloody thing for more than 5 years I think, but the trend is indeed worrying. It is true that someone has told me years ago, when China property market in gloom, China shares will be in boom. It is just another cycle but I have a gut feeling that A-shares will go beyond 6,000 marks by end of the year.

I concur on the "feeling".

Most foreign fund managers are still standing-by on the sideline on the SH-HK direct-link. The issues on the north-bound trade, will diminish over time, and more fund will flow-in via the link eventually

Most big fund manager are probably moving more funds to Europe as the ECB QE is a definite thing and should move share markets there up just like in USA and Japan.

For HKSE, HK ppl are also pretty good speculators and will not be able to resist the temptation to jump in with shanghainese.

Should see the interest rates in China drop down more and more in the near future to support their economy which will need lots of supporting as stocks speculation unlike property speculation does not create that much economic value.

Unfortunately we are not "on the ground" in china and don't know if even the coffee shop auntie is trading shares that would be a superb indicator to sell off your A-shares hehe...

(16-04-2015, 01:27 PM)BlueKelah Wrote: Unfortunately we are not "on the ground" in china and don't know if even the coffee shop auntie is trading shares that would be a superb indicator to sell off your A-shares hehe...

How about the following statistic, instead of by "coffee shop auntie", which might be only applicable to Singapore?

"Chinese investors opened nearly 5m trading accounts in March, a stampede that has continued into April. A survey by China’s Southwestern University of Finance and Economics found that two-thirds of new investors last year did not complete high school."

http://www.economist.com/blogs/freeexcha...tockmarket

Well sounds like its probably good time to start taking profits from A-Shares before things revert to mean

China Walks $264 Billion Tightrope as Margin Debt Powers Stocks
Confident that China’s stock market rally still has legs, Jiang Lin recently began borrowing money from her brokerage to buy more shares.

Her newly-opened margin finance account with state-owned China Investment Securities Co. has allowed Jiang, a 29-year-old marketing executive in Beijing, to double up her bets on the vertigo-inducing rally in Chinese share prices.

“It’s worth the risk,” said Jiang, while admitting she doesn’t fully understand how margin finance works because she hasn’t had her broker explain it to her.

Investors such as Jiang are part of a $264 billion dilemma facing the country’s securities regulator, the China Securities Regulatory Commission, after the Shanghai Composite Index climbed on Monday to a seven-year high. Should it tighten its rules governing margin finance and risk triggering a crash, or continue tinkering with regulations and see stock purchases on credit rise to potentially perilous levels?

Traders are betting that the regulator will shy away from any serious steps to curb an explosion of margin finance, which fueled a 93 percent one-year surge in Shanghai’s benchmark gauge. Securities firms’ outstanding loans to investors for stock purchases were a record 1.64 trillion yuan ($264 billion) as of April 10, up 50 percent in less than three months, despite bans imposed by the CSRC in January and April on lending to new clients by four Chinese brokerages.
Bubble Risk

China’s margin finance now stands at about double the amount outstanding on the New York Stock Exchange, after adjusting for the relative size of the two markets.

“Regulators are aware of the risk of rising margin debt but they can’t afford to puncture the equities bubble with very draconian measures,” said Lu Wenjie, a Shanghai-based analyst at UBS Securities Co. “They want to pelt the mice without smashing the china.”

With growth faltering and real estate prices heading lower, China is wary of adding a stock market crash to its economic problems, according to Mole Hau, a Hong Kong-based economist with BNP Paribas SA.

There’s also a political dimension because equity markets are dominated by small retail investors, some of whom may face ruin if a market slump prompts brokers to call in loans. Individual investors make up about 90 percent of equity trading in China, according to the CSRC.
Temporary Bans

The stock market’s upward march was delayed by only a few weeks in January by the CSRC’s three-month bans on Citic Securities Co., Haitong Securities Co. and Guotai Junan Securities Co. for letting customers delay repaying financing. This month’s news that another six brokerages faced penalties for their margin lending was also brushed aside by investors.

Sterner measures could include tightening capital requirements for brokerages and raising the asset threshold for investors seeking margin finance, said Castor Pang, Core Pacific-Yamaichi Hong Kong’s head of research. For now, clients must have at least 500,000 yuan of assets.

The CSRC indicated it could be considering tougher action when its Chairman Xiao Gang was quoted by China National Radio last month as saying it’s planning revisions to regulations on margin finance and securities lending to prevent systemic risk. Xiao didn’t give details of the possible measures.

Regulatory interventions such as stamp duty hikes and curbs on day-trading mechanisms have triggered three market slumps since the 1990s, according to UBS’s Lu.

Read more from link above.....
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When you see unprecedented margin expansion and euphoria, you know the end is near

The Economist article is quite fair in its reporting.

China's own QE coupled with the lack of alternatives for locals (anti-corruption + property slowdown) translated into a stampede on Chinese and Chinese linked stocks.

We have to bear in mind that Chinese financial markets remain closed to foreigners and hence the ability to control the accompanied effect is there.

Personally, Chinese invisible hands are intelligent. They know what they are up to but to many of us, we can only infer from what we are witnessing and based on our experience.

Since its a close mkt, we can only watch with limited ability to participate in such a bubbly scenario. I think it will be another good lesson in the making for many of us. Rationally, it is hard to participate in such bubbly conditions from the value perspective but learning from the free experience as an outsider may turn out to be invaluable for many of us.

GG

(16-04-2015, 03:07 PM)CityFarmer Wrote:

(16-04-2015, 01:27 PM)BlueKelah Wrote: Unfortunately we are not "on the ground" in china and don't know if even the coffee shop auntie is trading shares that would be a superb indicator to sell off your A-shares hehe...

How about the following statistic, instead of by "coffee shop auntie", which might be only applicable to Singapore?

"Chinese investors opened nearly 5m trading accounts in March, a stampede that has continued into April. A survey by China’s Southwestern University of Finance and Economics found that two-thirds of new investors last year did not complete high school."

http://www.economist.com/blogs/freeexcha...tockmarket

Through train already allow you to buy A-shares and let the onshore capital flow out into the HKSE which is not RMB based but HKD based.

Capital is no longer as closed as it was with current account almost fully liberalised with more opening of the capital account relatively soon.

Clamping down on speculative bubble but underwriting slowing real economy... China style QE but certainly liquidity will prevail...

Chinese central banks are extremely busy over weekends... nothing new as new policies are better digested over weekends where herd instincts have little avenue to unleash their energy...



http://mobile.reuters.com/article/idUSKB...9?irpc=932

China cuts bank reserves again to fight slowdown
Sun Apr 19, 2015 5:58am EDT
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BEIJING (Reuters) - China's central bank on Sunday cut the amount of cash that banks must hold as reserves, the second industry-wide cut in two months, adding more liquidity to the world's second-biggest economy to help spur bank lending and combat slowing growth.

The People's Bank of China (PBOC) lowered the reserve requirement ratio for all banks by 100 basis points to 18.5 percent.

The reduction is effective from April 20, the central bank said in a statement on its website www.pbc.gov.cn.

The latest cut in the reserve requirement shows how the central bank is stepping up efforts to ward off a sharp slowdown in the economy.

Weighed down by a property downturn, factory overcapacity and local debt, growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014, even with expected additional stimulus measures.

The PBOC last cut the reserve requirement ratio for all commercial banks by 50 basis points on February 4, the first industry-wide cut since May 2012.

The central bank has also cut interest rates twice since November in a bid to lower borrowing costs and spur demand.

(Reporting by David Stanway. Editing by Jane Merriman)