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

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Why I won’t invest in China’s stockmarket: lack of transparency
ROGER MONTGOMERY THE AUSTRALIAN JULY 11, 2015 12:00AM

The year to June witnessed enormous variation in sharemarket returns.

The Australian All Ordinaries Index recorded a miserly 1.3 per cent return, excluding dividends. The Shanghai Composite Index was easily the best performing major market with a return of 108.8 per cent.

That excitement, which saw the Chinese market up 152 per cent at its peak, was driven by a lot of leverage (that is, investors borrowing to finance their share investments).

I previously have pointed out individual names selling on nose-bleeding multiples.

The 30 per cent decline in the past month has seen $US3.2 trillion ($4.3 trillion) of value, or more than two times the total value of the Australian sharemarket, wiped out.

Given most small Chinese investors who undertake margin lending joined the market near its peak, there is a fear this decline will transmit into the real economy.

Making matters worse, more than a quarter of the companies, representing one-third of the market capitalisation, listed on the main exchanges in Shanghai and Shenzhen have had their stock suspended, something usually reserved for significant imminent announcements.

The “risk off” bet (the decision of many Chinese investors to sell at the same time) has translated into a recent sharp decline in iron ore, down 26 per cent to about $US45 a tonne; oil, down 12 per cent to $US52/bbl and copper, down 7 per cent to $US2.44 a pound.

Investors lucky or insightful enough to get their money offshore have just witnessed the Australian dollar hitting six-year lows at sub US74c. On the downside, that trip to Aspen just got a bit more expensive.

The objective of the recently launched Montgomery Global Fund is to purchase a portfolio of 15-30 high-quality companies, with good prospects at a discount to their estimated intrinsic value, and if there are insufficient companies that appeal, then allow the cash component of the portfolio to build.

To run such a fund you need to be absolutely sure of the numbers that you work with. Excess volatility also does not make the job any easier. Some investors will take heart at the ‘rebound’ we saw at the end of the week in the Chinese share market with a 6 per cent jump in a single session.

But the fund does not and is unlikely ever to own any Chinese listed companies.

The issue I have is one of transparency and that has a lot to do with the audit process and the hurdles foreign auditors face when trying to assess Chinese companies.

Such financial and business information has been categorised by the Chinese government as state secrets, so cannot be turned over to foreigners.

The “big four” auditing firms do not operate in mainland China. Instead, they essentially license their brand name to local affiliates.

Under US law, all major auditors must undergo regular inspections by the Public Company Accounting Oversight Board.

Yet the PCAOB is not allowed by the Chinese government to inspect the local Chinese affiliates of the big four auditing firms.

It cites national security reasons. Therefore, all US-listed Chinese firms appear to be in breach of the Securities Exchange Act.

The Securities and Exchange Commission, however, basically has caved in to Beijing’s refusal to turn over such corporate information to US regulators. The SEC had the right to delist all Chinese companies from US exchanges for being in breach of the Securities Exchange Act. It chose not to.

Chinese accounting expert Paul Gillis, from the Guanghua School of Management at Peking University, sums up the situation nicely: “Today we have different rules for Chinese companies that list in the US than we have for others. Not only is the SEC dependent on Chinese regulators to decide what documents they can see, the PCAOB remains unable to conduct inspections of auditors.”

In Australia, we have the Corporations Act 2001, which sets out the laws dealing with companies in Australia. Section 310 of the act states: “The auditor: (a) has a right of access at all reasonable times to the books of the company, registered scheme or disclosing entity; and (b) may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.”

So what would an Australian auditor do if it were faced with the task of auditing a Chinese company?

Of course there are always opportunities in China, but there are safer ways of playing the growing middle class — and you don’t need to suffer the knee-trembling volatility or poor transparency of investing directly into a Chinese listed company.

Roger Montgomery is founder and chief information officer of the Montgomery Fund.
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賣樓炒股蝕375萬
滬男大屋搬細屋
http://hk.apple.nextmedia.com/internatio...1436153253
You can find more of my postings in http://investideas.net/forum/
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http://www.theguardian.com/business/2015...n-property

China's rich seek shelter from stock market storm in foreign property
Australia, Britain and Canada brace for surge in interest after signs Chinese buyers are seeking safe-haven property markets in wake of stock market volatility
Sydney real estate
A Sydney real estate agent (right) escorts a potential buyer from Shanghai during an inspection of a property for sale in the Sydney suburb of Vaucluse on 11 July. Photograph: David Gray/Reuters
Reuters
Sunday 12 July 2015 14.22 AEST Last modified on Sunday 12 July 2015 14.37 AEST

Real estate agents in Australia, Britain and Canada are bracing for a surge of new interest in their already hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the turmoil in Shanghai’s stock markets.

Sydney agent Michael Pallier said in the past week alone he has sold two new apartments and shown a A$13.8m (US$10.3m) house in the harbourside city to Chinese buyers looking for an alternative to stocks.

China’s stock market crash is a problem for the whole world
Isabel Hilton
Read more
“A lot of high-net-worth individuals had already taken money out of the stock market because it was getting just too hot,” Pallier, the principal of Sydney Sotheby’s International Realty, said. “There’s a huge amount of cash sitting in China and I think you’ll find a lot of that comes to the Australian property market.”

Around 20% has been knocked off the value of Chinese shares since mid-June, although attempts by authorities to stem the bleeding are having some effect.

Many wealthy Chinese investors had already cashed out. Major shareholders sold 360bn yuan (US$58bn) in the first five months of 2015 alone, compared with 190bn yuan in all of 2014 and an average of 100bn yuan in prior years, according to Bank of America Merrill Lynch.

While much of that money may initially be parked in more liquid assets like US Treasury bonds and safe-haven currencies such as the Swiss franc, there is growing evidence that foreign property sales may receive a boost.

“There is anecdotal evidence that Chinese buyers have intensified their interest in safe-haven global property markets, including London, as a result of the recent stock market volatility,” said Tom Bill, head of London residential research at Knight Frank.

Ed Mead, executive director of realtor Douglas & Gordon in London, said his firm had seen two buyers from China looking to buy whole blocks of flats.

“It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.“

Since 2000, China has had the world’s largest outflow of high-net-worth individuals. Around 91,000 wealthy Chinese sought second citizenship between 2000 and 2014, according to a report by residence investment broker Lion Global, a factor that is fuelling demand to buy foreign property.

Most of these individuals, defined as those with net assets of US$1m or more excluding their primary residences, are moving to the US, Hong Kong, Singapore and Britain.

Brian Ward, president of capital markets and investment services for the Americas at commercial property company Colliers International, said Chinese investors had already sunk around US$5bn into US real estate in the first six months of 2015, more than the US$4bn they invested in the whole of 2014.

In London, Alex Newall, managing director of super prime residential realtor Hanover Private Office estate agents said he had seen an increase in interest from Chinese investors at the top of the market, although no transactions yet.

“They’re wanting to try and park large sums of money – I’m talking from £25m [US$38.5m] to £150m,” Newell said. “They’re looking to park that capital into London homes.”

Australia and Canada are also increasing in popularity, gaining an edge from their weakening currencies.

“Property prices are still cheap in RMB [yuan] terms,” said Timothy Cheung, a principal of Morphic Asset Management in Sydney.

The rush by Chinese investors into foreign property has not been without criticism, with some in London, Sydney and Vancouver blaming them for pushing up already spiralling prices.

The Australian government has moved to look tough on the issue, introducing new fees and jail terms for those found flouting foreign investment rules. The Chinese owner of a A$39m Sydney mansion was forced to sell up earlier this year after it was revealed the property had been bought illegally through a string of shell companies.

Others are concerned that Chinese investors who didn’t bail out of stocks quickly enough will be a drag on international property markets, particularly after Beijing on Thursday banned shareholders with large stakes in listed firms from selling for six months.

In London, Naomi Heaton, the chief executive of London Central Portfolio, said she had heard of investors pulling out of new-build purchases because they no longer had the capital.

It was a similar story for Vancouver real estate agent Andrew Hasman, who focuses on the city’s affluent westside area.

“I had a call last week from another agent wanting to know if a seller of a transaction we just did would allow the buyer to back out, because they had just recently lost a huge amount of money in the Chinese stock market correction,” Hasman said.
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People's Daily: China police find clues of illegal stock trading
The only way to avoid making mistakes is not to do anything. And that … will be the ultimate mistake. - Goh Keng Swee
A pessimist complains about the wind; an optimist expects it to change; the realist adjusts the sails. - W. A. Ward
Learn from the mistakes of others. You won't live long enough to make them all yourself. - Jane Bryant Quinn
人生最大錯誤,用健康換取身外之物。 ^ 人生无常,珍惜当下。 ^ 放弃固执,适时变通。 ^ 前面是绝路,希望在转角。

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I am closely following his company. I share the same view on the current state of China stock market...

Fosun’s Guo Says Market Deficiency Partly Behind Stock Rout

Billionaire Guo Guangchang said deficiencies in designing China’s financial infrastructure were partly behind the slump that wiped out almost $4 trillion from the nation’s stock markets.
The equity market is young and going through an “adolescent period,” the founder and chairman of Fosun Group, China’s largest closely held conglomerate, said in a speech at a Shanghai forum on Sunday. Without elaborating on the deficiencies, he said even mature markets have made mistakes.
...
http://www.bloomberg.com/news/articles/2...tock-slump
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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Fosun = Teledyne under Singleton???
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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Chinese stock crisis: margin financing value halves
THE AUSTRALIAN JULY 14, 2015 12:00AM

Scott Murdoch

China Correspondent
Beijing

Source: TheAustralian

The value of margin financing in the Chinese equities market has nearly halved over the past fortnight, as a result of the recent rout, as investors scale back leveraged finance levels and the government puts in place strict measures to ­reduce volatility.

In Shanghai, the Composite Index rose 2.39 per cent yesterday to 3970.39 while in Shenzhen the mainland-listed shares surged 4.2 per cent to 2217.19.

Despite the positive sentiment, the main Shanghai market is down almost 24 per cent over the past month but 93 per cent higher over the past year.

The bounce in the markets yesterday came after the Chinese Securities Regulatory Commission announced a fresh crackdown on stock manipulation and said it was investigating a number of brokers, primarily based in Shanghai.

It also said it would implement greater regulation of “grey ­market” lending, in a bid to reduce the high volume of leverage that was evident before the savage sell- off that began last week.

Xinhua, the official national news agency, said the Public Security Ministry was heading an investigation into brokers that deliberately manipulated the market and exacerbated the selldown that wiped at least 30 per cent off the value of Chinese stocks.

The appointment of the ministry, which essentially is the national police force, has surprised some analysts in China who now believe major criminal charges could be laid against some brokers.

“An investigation ... has found clues that certain trading firms suspectedly manipulated futures trading in the stockmarket,” ­Xinhua said yesterday.

“(It is) to investigate what it called ‘malicious short-selling of stocks and stock indices’, an ­example of the dodgy practices many believe were part of the ­recent stock over the past few weeks.”

A major new report published by CSLA, the brokerage firm, ­yesterday found that margin ­financing in the national equities market had fallen from a peak of 2.4 trillion yuan ($520 billion) to 1.4 trillion yuan over the past ­fortnight.

Analysts said the sell-off last week was exacerbated by margin calls, and the value of leveraged ­finance was now back almost to the same point it was, 1.2 trillion yuan, when the market’s surge began in February.

CLSA chief China strategist Francis Cheung said that at its peak margin financing represented just 4 per cent of total retail deposits but the current level was now more sustainable.

Almost 1400 stocks remain suspended on the Shanghai main boards but are expected to come back online in the next few weeks as the market recovers.

A recent survey by CLSA found that two-thirds of retail investors did not have margin loans, despite the sharp jump in leveraged stock-buying since the beginning of the year.

It found that mostly speculative buyers or “high-net-worth” investors took on margin loans, which meant that the recent stockmarket sell-off did not have a major negative effect on retail investors.

“Retail investors have been concerned but they have not leveraged up all their savings and put it in the market,” Mr Cheung said.

“The people who have done that have been those who are aged between 20 and 30 or the high-net-worth investors. Most people in China have been very conservative,” Mr Cheung added. “The majority of retail investors hold the banks and blue-chip stocks and we think that is going to put some pressure on some more of the speculative stocks in the market.”

Mr Cheung said he believed that a reduced value of leveraged finance would help the government’s equity market stabilisation measures work more effectively.

“We are back to a more normalised level now,” he said.

“I think that is going to help the government policies to work. We think there is some value starting to emerge, there are still more than 1400 stocks suspended and once they are unlocked and come back on to the market that is about 30 per cent of the market’s capitalisation and 40 per cent of total trading volume.”

Mr Cheung said the recent rout was a “learning curve” for Chinese policymakers but he was confident the government would commit to its financial market reforms.

ANZ yesterday forecast the Chinese economy could grow by less than 7 per cent in the second quarter of this year, the lowest rate for six years. The bank said sluggish domestic demand meant the economy might expand by 6.8 per cent. It said the recent equities sell-off would have limited impact on the real economy but it left room for the People’s Bank of China to cut interest rates again in the next few months.
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曾淵滄專欄(13/7/15):干預市場成新常態Market Intervention is a new norm

有傳媒拍攝到公安車停在中證監門口,公安查惡意沽空應是真的,如何分辨惡意沽空與善意沽空呢?無論如何,公安出手,沽空者只能投降。
至今中國股市依然是個半封閉市場,大家千萬不要將中國股市當成全自由
市場來預測其動向。經過2008年的金融海嘯,美國印鈔票買股票、買國債後,世上已沒有全自由的股票市場,投資者一定要明白,在非常時刻,全球所有的政府不論是東方或是西方,都會直接干預市場,這是新常態,不可不知。Till now, China's stock market is still a semi-closed market. We cannot predict its movements using a free market model. In fact, after the 2008 financial crisis in which United States printing money to buy stocks and bonds, the world stock markets are no longer free. Investors must understand that at the very critical moment, all governments worldwide, whether East or West, will directly intervene the market. Market intervention is the new normal.
現在問題是,沽空者平倉後股市還能不能升?那些低價賣出股票,那些被迫斬倉的股民有信心重返股市嗎?這是考驗習近平經濟改革的焦點。The question now are: after short sellers cover their shorts, can the stock market rise ? Will the Investors who are forced to liquidate their positions by selling their stocks cheap stll have confidence to come back into the market? This is a test of the focus of Xi Jinping's economic reforms.

民企靠股市集資壯大Private enterprises to grow by IPO

我不斷強調,習近平經濟改革重點之一是扶植民企壯大,要民企壯大,民企必須有錢,錢從何來?最佳來源是股市,股市升企業就可從股市集資,股民也心甘情願付錢申請新股,每次IPO就是股民為企業的獻金遊戲。要恢復信心不會是很快,但我依然樂觀。I have emphasized repeatedly, one important focus of Xi Jinping's economic reform is to foster the expansion of private enterprises. For private enterprises to grow, private enterprises must have the money. Where the money come from? The best source is the stock market. When the stock market rose, enterprise can raise funds from the stock market; investors are willing to pay to apply for the new shares, each IPO will be a game of investors' corporate donations. However, to restore confidence will not be so soon, but I am still optimistic.
除中國A股因素外,希臘問題又再露曙光,近月我一直以樂觀態度看希臘問題,理由是希臘人也不是真的想退出歐元區,歐盟更不想趕希臘出去,談判期間雙方立場強硬那是談判的技巧,談判也沒有傳媒不斷提出的所謂死線,傳媒不是把6月30日當死線嗎?因當日希臘欠國際基金會16億歐元的貸款到期,傳媒指到期那天若無力還債,將是世界末日,現在6月30日過了,希臘政府也沒還債,但所謂死線也消失了。In addition to the China A -shares, the Greece also has new hope. In recent months, I'm optimistic about Greece problem on the grounds that the Greeks do not really want to leave the eurozone and the European Union do not want Greece to exit the Eurozone. During negotiations, adopting hardline position is one of the negotiation skills. Media reported the so-called dead-line for negotiations is 30th June as it is the due date which Greece need to pay back the 1.6 billion owed to ​​the International Monetary Fund. The media refers the due date as the end of the world because Greece will become insolvent if Greece cannot pay. Now 30th June has past and the Greek government still have not pay; the so-called dead line has disappeared.
The only way to avoid making mistakes is not to do anything. And that … will be the ultimate mistake. - Goh Keng Swee
A pessimist complains about the wind; an optimist expects it to change; the realist adjusts the sails. - W. A. Ward
Learn from the mistakes of others. You won't live long enough to make them all yourself. - Jane Bryant Quinn
人生最大錯誤,用健康換取身外之物。 ^ 人生无常,珍惜当下。 ^ 放弃固执,适时变通。 ^ 前面是绝路,希望在转角。

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The impact of the recent China stock market rout, isn't only on China retail investors...

APS Asset suspends redemptions from China fund after stock rout

SINGAPORE (July 14): Singapore-based APS Asset Management Pte has suspended the redemption of shares in its APS Greater China Long/Short Fund after the rout in China’s stock market.

The suspension of Class A and Class B participating shares is in line with the fund’s articles of association, according to the statement Monday to the London Stock Exchange.
...
http://www.theedgemarkets.com/sg/article...stock-rout
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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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?

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Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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