Bloomberg: U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices

Air seeps out of Chinese stock 'bubble'

The mainland Chinese stock market, which had gained more than 150% in a year’s time, prompting bubble warnings, seems to be deflating, as shares dipped 13.3% this week.

The Shanghai composite index had its roughest week since the financial crisis back in 2008, putting it in official correction territory for the second time this year. A correction is defined as a decline of 10% or more from a recent high.

The China index, popular with newbie investors in China, many who are buying stocks with borrowed money to amp up returns, tumbled 306.99 points, or 6.4%, to 4478.36.

“The most notable move in Asian markets today,” Barclays told clients in a research note, “has been the large correction in Chinese stocks.”

The selloff follows a heady run for Chinese stocks. The Shanghai index soared nearly 158% from its intraday low of 2010.53 on June 20, 2014, to its intra-session high of 5178.19 last Friday.

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Whenever there is a large growing divergence in earnings and share prices, such as in china now with prices uptrend and earnings downtrend, sooner or later prices will have to gravitate down if earnings continue to slip.

let's see what happens next week.

(01-06-2015, 05:41 PM)specuvestor Wrote: While commentators are, well commenting, the Chinese authorities are acting. And for some bizarre reason the shanghai market is still ignoring the govt effort to cool down the stock market, bizarre because they seemed to have short memories of govt accomplishing what they say they will do, I'm pretty sure the govt will succeed and in the short term I wouldn't be too bullish on China stock market

And as usual when the market crack, commentators will blame the govt, adding this to the irony list. That's why they are commentators.

The short term correction is here. Let's see what the commentators will say

What investors will do in a correction will be up to their risk tolerance and timeline. Both buys and sells can be valid depending on your timeline

(20-06-2015, 06:01 PM)specuvestor Wrote:

(01-06-2015, 05:41 PM)specuvestor Wrote: While commentators are, well commenting, the Chinese authorities are acting. And for some bizarre reason the shanghai market is still ignoring the govt effort to cool down the stock market, bizarre because they seemed to have short memories of govt accomplishing what they say they will do, I'm pretty sure the govt will succeed and in the short term I wouldn't be too bullish on China stock market

And as usual when the market crack, commentators will blame the govt, adding this to the irony list. That's why they are commentators.

The short term correction is here. Let's see what the commentators will say

What investors will do in a correction will be up to their risk tolerance and timeline. Both buys and sells can be valid depending on your timeline

A healthy correction is need. IMHO, CCP has yet to finish with their economic restructuring efforts in China... far from it... Akan Datang

Usually when there is a stock mania such as in china, where there is formation of an overvalued asset class in a short time from excess credit and leverage, a crash rather than correction is more likely to happen once sentiment shifts in the opposite direction.

Of course, china market is controlled by the state so they may be able to manufacture a correction rather than let it crash.

sent from my Galaxy Tab S

Chinese Investors Are Swimming in a Bubble

JPMorgan Chase and BlackRock disagree about China's stock bubble. The former says last week's 13 percent share plunge is a reason to buy; the latter sees things "deflating quite rapidly."

So who's right? JPMorgan is correct in the very short run. President Xi Jinping's government has fueled China's bull market and it will do all in its power to sustain it. But in the months ahead, the odds favor BlackRock's take, which is based on the Warren Buffett school of financial analysis.

"The tide is going to go out, and there’s going to be a lot of people without their swimming trunks on," strategist Ewen Cameron Watt of BlackRock told Bloomberg Television, borrowing from Buffett's observation about investors caught swimming naked when markets get shaky.

Considering the sudden wave of sell orders in Shanghai and Shenzhen, we're about to witness a surge of investors caught skinny dipping. The math behind Chinese stock markets' more than $6 trillion surge over the past 12 months makes less sense by the day. Shares on mainland exchanges are trading at an average of about 256 times reported earnings, making China's market mania of 2007 look rational by comparison.
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Quoting buffet

looks like a steep way down before stocks get to anywhere near more respectable earnings multiples.

It is a good case study of "bubble", for those missed the last one.

Base on reading of interviews, I did see most fund managers are still optimistic on China equity market, with various argument, mainly from macro level.

When no fear is observed, this is a much more dangerous "bubble", than the pessimistic China property market.

(22-06-2015, 10:06 AM)CityFarmer Wrote: It is a good case study of "bubble", for those missed the last one.

Base on reading of interviews, I did see most fund managers are still optimistic on China equity market, with various argument, mainly from macro level.

When no fear is observed, this is a much more dangerous "bubble", than the pessimistic China property market.

Yes, assuming it does crash, it will be a good case study.

Once you see common folk crowding around the stock exchanges and opening record levels of brokerage accounts with margin component, and even farmer folk dabbling in stocks, that in itself is obvious evidence of a bubble. In the background, despite some price stability in big city property markets after the easing moves, new investment in land and building is actually still on a downtrend. Suspect that many richer investors there may not have not sold their property assets yet. However when they start getting margin calls and such with a crashing stock market, the property market could then see price pressure again from sellers trying to get some funding.

Despite what fund managers say, read a report somewhere that many of the big funds in HK are still sitting on the sidelines. If china does become a Japan 2.0, those fund managers will then be jumping in to buy up cheap and distressed assets.

Many in china will be having their rice dumplings whilst they ponder what to do next week.

(20-06-2015, 07:07 PM)greengiraffe Wrote:

(20-06-2015, 06:01 PM)specuvestor Wrote:

(01-06-2015, 05:41 PM)specuvestor Wrote: While commentators are, well commenting, the Chinese authorities are acting. And for some bizarre reason the shanghai market is still ignoring the govt effort to cool down the stock market, bizarre because they seemed to have short memories of govt accomplishing what they say they will do, I'm pretty sure the govt will succeed and in the short term I wouldn't be too bullish on China stock market

And as usual when the market crack, commentators will blame the govt, adding this to the irony list. That's why they are commentators.

The short term correction is here. Let's see what the commentators will say

What investors will do in a correction will be up to their risk tolerance and timeline. Both buys and sells can be valid depending on your timeline

A healthy correction is need. IMHO, CCP has yet to finish with their economic restructuring efforts in China... far from it... Akan Datang

If there is a 3-stage bubble, I think we are roughly end of Stage 1

By the time CCP finish restructuring we will be in stage 3 where the risk/reward will become more speculative and nonsensical.

(22-06-2015, 12:17 PM)specuvestor Wrote:

(20-06-2015, 07:07 PM)greengiraffe Wrote:

(20-06-2015, 06:01 PM)specuvestor Wrote:

(01-06-2015, 05:41 PM)specuvestor Wrote: While commentators are, well commenting, the Chinese authorities are acting. And for some bizarre reason the shanghai market is still ignoring the govt effort to cool down the stock market, bizarre because they seemed to have short memories of govt accomplishing what they say they will do, I'm pretty sure the govt will succeed and in the short term I wouldn't be too bullish on China stock market

And as usual when the market crack, commentators will blame the govt, adding this to the irony list. That's why they are commentators.

The short term correction is here. Let's see what the commentators will say

What investors will do in a correction will be up to their risk tolerance and timeline. Both buys and sells can be valid depending on your timeline

A healthy correction is need. IMHO, CCP has yet to finish with their economic restructuring efforts in China... far from it... Akan Datang

If there is a 3-stage bubble, I think we are roughly end of Stage 1

By the time CCP finish restructuring we will be in stage 3 where the risk/reward will become more speculative and nonsensical.

I certainly concurred with you on the scenario analysis.

We shall continue to monitor how the script pans out...

http://www.smh.com.au/business/in-chinas...hx45i.html

In China's buyout frenzy, Sequoia Capital's Neil Shen may hold key to future
Date
June 25, 2015 - 9:28AM

Boris Korby and Belinda Cao

Neil Shen is leading the charge among venture capitalists and private equity firms to scoop up companies listed in the US and ultimately take them public in the mainland.
Neil Shen is leading the charge among venture capitalists and private equity firms to scoop up companies listed in the US and ultimately take them public in the mainland. Photo: REUTERS/TYRONE SIU
In this month's $US19 billion ($24.66 billion) buyout frenzy of Chinese companies listed abroad, one man may hold the key to figuring what's next.

Neil Shen, the billionaire co-founder of Sequoia Capital China, is leading the charge among venture capitalists and private equity firms to scoop up companies listed in the US and ultimately take them public in the mainland, where a surging sharemarket means shares are being afforded higher multiples. Shen and Sequoia have targeted at least five companies for takeovers this month.