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

[CityFarmer]

Hmm.. shanghai stocks is down again today, why am i not surprised? if the downtrend continues will they have to halt the whole stock exchange?

sent from my Galaxy Tab S

I am not surprised too. It might be an minor adjustment to last two days of up.

[greengiraffe]

Warren Buffet will tell you it doesn't matter... no worries

Hmm.. shanghai stocks is down again today, why am i not surprised? if the downtrend continues will they have to halt the whole stock exchange?

sent from my Galaxy Tab S

[greengiraffe]

http://www.smh.com.au/business/markets/c...iblf9.html

Chinese economy shielded from 'spiky' sharemarket
Date
July 14, 2015 - 4:06PM
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Vanessa Desloires
Vanessa Desloires
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What effect has the sharemarket correction had on China's economy?
What effect has the sharemarket correction had on China's economy? Photo: Reuters
Did China's bubble burst, or has it just corrected after a meteoric rise?

The impressive 18 per cent rally since the Shanghai Composite index hit a recent low on Thursday suggests the Chinese government's interventions are working to stem a 30 per cent fall in shares in less than a month.

China's second-quarter GDP is due on Wednesday, but experts are sanguine about the real effects to China's growth on its famously "spiky" sharemarket.

Bloomberg Intelligence director of Asian research Tim Craighead said rather than a bursting of the sharemarket's bubble, the 30 per cent fall amounted to a "correction that is in response to a huge speculative fervour that had worked its way into the market".

He said China had a history of a spiky sharemarket.

"It is highly retail-oriented and the Chinese speculator – I don't even say investor – has a history of moving in and moving out on speculative hype," he said.

The latest bout of speculation started in September and October, Mr Craighead said, in anticipation of monetary easing, the Hong Kong-Shanghai stock connect and other reforms that promised a flow of global capital.

But he said the speculation took the market to "unprecedented highs" in terms of new accounts – some 258 million, one-third opened in the past nine months alone, according to Credit Suisse research – and margin leverage.

"At some point, that was coming to an end," he said.

The market has enjoyed three days of rallies in response to the unprecedented measures the Chinese government has thrown to prop up the market in the past three weeks, including cutting interest rates, increasing liquidity to brokers, stopping new listings and halting trading of some shares.

But seasoned China share investor Kerr Neilson, Platinum Asset Management's chief executive, was critical of the Chinese government's "lack of poise", labelling its extraordinary intervention "disturbing".

"By providing support to parts of the market, the government may have unwittingly encouraged investors to liquidate while there is a propping buyer," Mr Neilson wrote in a note to investors.

What does the correction mean to the economy?
The relationship between the sharemarket and the economy was limited because of the lack of household wealth tied into the sharemarket, Mr Craighead said.

The market, constituting mainly retail investors, had tied up around 11 per cent of their household wealth, relatively small compared with 30 per cent in the US.



A household equity investment survey also found that close to 9 per cent of households had stock accounts, and only 3.5 per cent used margin financing, according to Barclays research, headed by David Fernandez.



"Given that the equity boom-bust has happened in such a short time period, it is likely that the majority of the consumers have not yet dramatically changed their propensity to consume or spending on discretionary goods.

"We see the financial sector contribution to GDP growth as closely related to stock market performance, suggesting downside risks if the sell-off persists," Mr Fernandez said.

Barclays found 10 per cent rise in market returns would boost annual GDP growth by 0.2 per cent. Conversely, a further 20 per cent fall in the market from here would result in a 10 per cent annual loss, with a fall of 0.2 percentage points.



Mr Craighead said GDP estimates may come down from reduced contributions from the financial sector.

"That doesn't however mean that it has an impact on underlying consumption trends from business or consumer or on the import/export market," he said.



But Mr Craighead said the biggest concern was China's policy makers pushing back reforms in the wake of what happened to the market.

"The biggest issue from our perspective strategically is that Chinese policy makers don't lose sight of reform driving the rebalancing of the economy, because of what's happening on the stock market," he said.

However, he said, given the continued downturn, the monetary easing should continue.

What should we be looking out for in Wednesday's GDP figures?
Mr Craighead anticipates growth will have slowed to a 6 per cent handle, below the 7 per cent China had been tracking towards.

"It's slower than where it has been but we don't see that falling further," he said.

Those figures shouldn't be cause for alarm in an economy shifting away from an export-driven manufacturing economy to a more consumer -based developed one, he said.

"We're past the hyper-growth of Chinese economic activity but if they can drive reform in the right way, they can indeed get through the middle-class trap that so many emerging economies have been stuck in, where they can't get through to the next phase of economic activity," he said.

Mr Fernandez forecast GDP growth of 6.8 per cent for 2015, with signs emerging for stabilisation in growth.

"This baseline forecast continues to expect a stabilising property investment and stronger infrastructure investment in the second half," he said.

"But we would need to revisit this forecast if more widespread systemic financial risks become evident."

[BlueKelah]

Bill Ackman Sees China Stocks as Worse Than U.S. in ’07

Bill Ackman, the billionaire hedge fund manager who runs Pershing Square Capital Management, said China is a far bigger concern to markets than Greece and that the country’s stock market scares him.

“China is a bigger global threat by far,” Ackman said Wednesday at the CNBC Institutional Investor Delivering Alpha Conference in New York. “The Chinese stock market is a fairly remarkable phenomenon and I think kind of a frightening one.”

China’s gross domestic product rose 7 percent in the last quarter as policy makers stepped up support, boosting the country’s stock market. Equities have since plunged from a June 12 peak wiping almost $4 trillion in value as investors that borrowed to buy shares unwound their trades.

Ackman said he’s worried about China’s lack of transparency and questioned the reliability of its economic statistics. While the country has good long-term prospects, shorter term you have to be concerned, he said.

“If you look at the Chinese financial system, you look at shadow banking, you look at the amount of leverage, you look at how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the U.S.”

Mary Erdoes, chief executive officer of JPMorgan Asset Management, said at the event that China’s equities markets don’t reflect the economy.

“It’s been 25 years of 7 percent growth,” said Erdoes. “No other country has displayed that. Not even the U.S. There’s a lot going on in the economy and it’s completely disassociated with the stock market.”

[greengiraffe]

Jul 15 2015 at 11:09 AM Updated Jul 15 2015 at 3:00 PM

Is investing in China worth the risk?

The risk level in Chinese shares is more than twice that of Australian shares.

by Jeremy Chunn
Let's keep this simple. China is risky: the charts show it. The past year has been a wild ride, but over the past 10 years the Shanghai Shenzhen Composite 300 sharemarket index has whipped up and down like a cartoon rabbit in the back row of a boring three-hour opera. (And I can use that analogy because I was that rabbit last Wednesday night. Thanks a lot, Vivaldi!)

But back to the point. Two fundamental variables of investment are risk and return. The return part is the bit everyone pays most attention to because it's usually the annualised percentage rate the asset has grown by, or shrunk by, for a determined period.



So that's pretty easy to understand, and a regular investor will look at returns and nothing else when assessing an asset, hoping it will be a fair indicator of what's to come. There are no guarantees, of course.

But risk is just as important - so important. What is it? It's the volatility in those returns. It's the jagged ups and downs, the rocket launch and the ice abyss. Risk is the standard deviation of returns, which is the variance from average.

If the mathematical terminology turns you off, that's too bad. It gets worse. The table here shows risk and return data for the Shanghai Shenzhen Composite 300, the MSCI World Index and our dear friend the S&P/ASX 200. The risk number is the expected variation above or below the average monthly return for the past 10 years. In the lingo, it's the standard deviation.

Triple 3 Partners executive director Simon Ho watches the global risk barometer every day in his role providing a wholesale product linked to the Chicago Board Options Exchange volatility index, or VIX.

"There is no VIX index in China, yet," Ho says. "The only thing available [to assess risk] is a historical measure of volatility."

The VIX reflects demand for options bought in anticipation of a sharp market downturn, so it soars when the market dives, by which time it's too late to get most benefit from holding it. The idea is to hold a little bit of VIX as insurance. It must be a hard sell.

"People find it very hard to contextualise - what does volatility mean?" Ho says. "Standard deviation, or volatility, is just a measure of the spread of returns."

No one should ever be surprised by risk, and it's impossible to determine which markets will be shaken next, but Ho has some thoughts on it. "A focal point has to be US interest rates, and China, for the rest of the world but particularly Australia, and then I think with rising interest rates and a stronger dollar you really have to be mindful of other developing markets," he says, singling out Brazil and Turkey.

"The debt these emerging market economies have assumed over the last two years has risen dramatically, so a rise in interest rates and a decline in their currencies makes servicing US-dollar debt much more expensive."

Summarising risk as a statistic is kind of meaningless because of the assumption that the normal distribution applies. That's the statistical distribution applied to many natural measures, such as a person's height. It says 68 per cent of results will be one standard deviation either side of the average; 95 per cent will be within two standard deviations; and 99 per cent within three standard deviations.

Usually only one standard deviation is quoted, but an extra row is included in the table here to show the expected range of returns for three standard deviations, or 99 per cent of outcomes.

The risk level in Chinese shares is more than twice that of Australian shares. This is reflected in the line chart, where the index is leaping up and down when compared with developed markets.

Remember: the normal distribution is being fitted here for convenience. Future returns do not have to obey any academic assumptions; the global financial crisis proved that. A "fat tail" event is so called because the normal distribution would not have predicted it. Anything can happen.

This article first appeared on afrsmartinvestor.com.au.

[BlueKelah]

Could China Be the Next Japan?

China today is very similar to Japan in 1990, and the world's No. 2 economy should be wary of repeating the policy mistakes of Japan
by Enda Curran
July 16, 2015 — 12:01 AM HKT

It's a tale of two economies.

On the same day that China surprised with better-than-expected GDP, Japan's central bank was forced to lower its growth outlook.

But even as China's economy shows signs of recovering from a sharp slowdown, it remains vulnerable to the type of crash that dragged Japan into decades of falling consumer prices and stagnant growth. That's according to research notes from Oxford Economics Ltd. and HSBC Holdings Plc, which warn of the similarities between China today and Japan in 1990.

While the two reports come to different conclusions, they both agree there is enough in common between the two countries to at least merit caution. Japan enjoyed rapid growth through the 1980s until the bursting of a real-estate and stock-market bubble in 1990. China too, has enjoyed decades of fast debt-fueled growth that created a steep run up in real estate prices and, over the past year, one of the world's biggest ever stock market rallies.

In its analysis, Oxford Economics found.........

Read more here

[opmi]

^^ Need 1 more stock bubble like the one in late 80s. JP Govt also 'supported' the stock markets after 87 crash..
...that's when the bubble really inflated..

[greengiraffe]

If lightning strikes twice, then there won't be crisis...

Could China Be the Next Japan?

China today is very similar to Japan in 1990, and the world's No. 2 economy should be wary of repeating the policy mistakes of Japan
by Enda Curran
July 16, 2015 — 12:01 AM HKT

It's a tale of two economies.

On the same day that China surprised with better-than-expected GDP, Japan's central bank was forced to lower its growth outlook.

But even as China's economy shows signs of recovering from a sharp slowdown, it remains vulnerable to the type of crash that dragged Japan into decades of falling consumer prices and stagnant growth. That's according to research notes from Oxford Economics Ltd. and HSBC Holdings Plc, which warn of the similarities between China today and Japan in 1990.

While the two reports come to different conclusions, they both agree there is enough in common between the two countries to at least merit caution. Japan enjoyed rapid growth through the 1980s until the bursting of a real-estate and stock-market bubble in 1990. China too, has enjoyed decades of fast debt-fueled growth that created a steep run up in real estate prices and, over the past year, one of the world's biggest ever stock market rallies.

In its analysis, Oxford Economics found.........

Read more here

[BlueKelah]

Billionaire Paul Singer: China Crash Is 'Way Bigger Than Subprime'

[Image: 1200x-1.jpg]

Hedge fund manager Paul Singer said that China’s debt-fueled stock market crash may have larger implications than the U.S. subprime mortgage crisis, echoing warnings from fellow billionaire money managers Bill Ackman and Jeffrey Gundlach.

“This is way bigger than subprime,” Singer, founder of hedge fund Elliott Management, said at the CNBC Institutional Investor Delivering Alpha Conference in New York in response to a question about China’s crash potentially affecting other markets. Singer said it may not be big enough to cause a global financial market conflagration.

China’s stock market has dropped from a June 12 peak wiping out almost $4 trillion in value in less than a month after investors who borrowed to buy shares had to unwind trades. Markets tumbled even as President Xi Jinping’s government ramped up efforts to stem the rout, including preventing share sales of companies.

The threat to markets from the country is a bigger concern to Ackman, who runs Pershing Square Capital Management, than Greece.

“China is a bigger global threat by far,” Ackman said Wednesday at the conference. “The Chinese stock market is a fairly remarkable phenomenon and I think kind of a frightening one.”
Markets tumbled even as President Xi Jinping’s government ramped up efforts to stem the rout

Ackman said he’s worried about China’s lack of transparency and questioned the reliability of its economic statistics, the same day that China said gross domestic product rose 7 percent in the last quarter.

“If you look at the Chinese financial system, you look at shadow banking, you look at the amount of leverage, you look at how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the U.S,” Ackman said.
Gundlach Comparison

DoubleLine Capital co-founder Gundlach compared the stock market there with the Nasdaq in 1999, 2000, when technology stocks collapsed.

“China is really kind of concerning,” Gundlach said in an interview with CNBC at the conference. “China is far too volatile and murky to invest in.”

Mary Erdoes, chief executive officer of JPMorgan Asset Management, said at the event that China’s equities markets don’t reflect the economy.

“It’s been 25 years of 7 percent growth,” said Erdoes. “No other country has displayed that. Not even the U.S. There’s a lot going on in the economy and it’s completely disassociated with the stock market.”

[greengiraffe]

Did u notice that he is another botak? Our famous Botak also retired liao...

Billionaire Paul Singer: China Crash Is 'Way Bigger Than Subprime'

[Image: 1200x-1.jpg]

Hedge fund manager Paul Singer said that China’s debt-fueled stock market crash may have larger implications than the U.S. subprime mortgage crisis, echoing warnings from fellow billionaire money managers Bill Ackman and Jeffrey Gundlach.

“This is way bigger than subprime,” Singer, founder of hedge fund Elliott Management, said at the CNBC Institutional Investor Delivering Alpha Conference in New York in response to a question about China’s crash potentially affecting other markets. Singer said it may not be big enough to cause a global financial market conflagration.

China’s stock market has dropped from a June 12 peak wiping out almost $4 trillion in value in less than a month after investors who borrowed to buy shares had to unwind trades. Markets tumbled even as President Xi Jinping’s government ramped up efforts to stem the rout, including preventing share sales of companies.

The threat to markets from the country is a bigger concern to Ackman, who runs Pershing Square Capital Management, than Greece.

“China is a bigger global threat by far,” Ackman said Wednesday at the conference. “The Chinese stock market is a fairly remarkable phenomenon and I think kind of a frightening one.”
Markets tumbled even as President Xi Jinping’s government ramped up efforts to stem the rout

Ackman said he’s worried about China’s lack of transparency and questioned the reliability of its economic statistics, the same day that China said gross domestic product rose 7 percent in the last quarter.

“If you look at the Chinese financial system, you look at shadow banking, you look at the amount of leverage, you look at how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the U.S,” Ackman said.
Gundlach Comparison

DoubleLine Capital co-founder Gundlach compared the stock market there with the Nasdaq in 1999, 2000, when technology stocks collapsed.

“China is really kind of concerning,” Gundlach said in an interview with CNBC at the conference. “China is far too volatile and murky to invest in.”

Mary Erdoes, chief executive officer of JPMorgan Asset Management, said at the event that China’s equities markets don’t reflect the economy.

“It’s been 25 years of 7 percent growth,” said Erdoes. “No other country has displayed that. Not even the U.S. There’s a lot going on in the economy and it’s completely disassociated with the stock market.”