amiret Posted June 16, 2015 Posted June 16, 2015 The Shenzhen market is up almost 200 percent over the past year. Its price-earnings ratio stands at a little less than 80. (Standard & Poor's 500 Index is up 9 percent and has a ratio of 19.) Much of the demand for Chinese shares is credit-fuelled and comes from small investors new to the game. In one week in April, according to The Economist, Chinese investors opened 4 million new brokerage accounts -- and, by the way, two-thirds of the country's newcomers to investing left school before the age of 15. The government wants a strong stock market for several reasons, including to support demand as property prices sag and growth in credit and investment slow. It has been talking up share prices. Official news outlets extoll the virtues of stock ownership. But the government surely can't have wanted the frenzy that in recent months has pushed the valuations of many companies to preposterous levels. Manic episodes rarely end well -- and in many respects, this is mania. It has been maniacal for the last 6 months in the Chinese stock markets. The indian stock market have been extremely subdued compared to China over the last 8 months. LINK
amiret Posted June 16, 2015 Author Posted June 16, 2015 " Technology stocks, heavily represented in the Shenzhen index, are especially in demand. (Tech stocks: What could possibly go wrong?) The price of China's highest-flying stock, Beijing Baofeng Technology Co., increased 4,200 percent in the 55 trading days after it went public; on Friday it was valued at 715 times reported earnings. Alibaba's valuation of 55 times earnings looks cowardly by comparison. Companies change their names and rebrand themselves as technology firms -- then watch their valuations soar. All this as the economy slows down. If it isn't a bubble, I don't know what is."
amiret Posted June 16, 2015 Author Posted June 16, 2015 " The tidal wave of money from mainland China has brought Hong Kong stocks to record highs. IPOs in China and Hong Kong so far this year have raised $63 billion, almost double the figure this time a year ago. And there’s more such money to come—Beijing plans to add a similar link between Hong Kong and Shenzhen, where the equity markets are even more volatile, as soon as this quarter. But with the flood of money has also come whiplash volatility. The best example of that is the recent debacle surrounding Hanergy Thin Film Power, a mainland China company that trades in Hong Kong. Just a few months ago Hanergy was one of Hong Kong’s biggest stocks by market cap (it was briefly worth more than Tesla). Then on May 20, it stopped trading after mysteriously falling 47% in a matter of minutes. " Investors in Hanergy—who include Quebec civil servants and US teachers—are are now sitting on suspended stock with a face value of HK$163 billion (US$21 billion) that might be worthless.
G_B_ Posted June 16, 2015 Posted June 16, 2015 yeah i read this in the FT a while back.... I do believe they have opened it to the foreign nationals as well....(investing) there is a big debate about including the Chinese stock exchnages in the MSCI index.....
amiret Posted June 16, 2015 Author Posted June 16, 2015 The SSE Composite is down 3.5 % today . But down 3 % and up 3 % the next day has become normal stock market behavior in China. The Billionaire Li Hejun apparently lost $ 15 Billion in 1 hour . But he was later found to be shorting his own companies stock Hanergy .
amiret Posted June 16, 2015 Author Posted June 16, 2015 " Using the most-watched mainland equity gauge as a guide, an investor might conclude that valuations are pricey, though still within reason: the index trades near a five-year high of 19 times estimated earnings -- well below the level of 36 reached during the 2007 bubble -- and in the same ballpark as the Standard & Poor’s 500 Index’s multiple of 17. " Problem with the Shanghai Composite is that 94 percent of Chinese stocks trade at higher valuations than the index, a consequence of its heavy weighting toward low-priced banks. "Use average or median multiples instead and a different picture emerges: Chinese shares are almost twice as expensive as they were when the Shanghai Composite peaked in October 2007 and more than three times pricier than any of the world’s top 10 markets." I wish i was smart and solvent enough to Short this Chinese Market . But then i recall the oft-repeated market adage attributed to Keynes : "The market can stay irrational longer than you can stay solvent."
amiret Posted June 19, 2015 Author Posted June 19, 2015 Shangai Composite was down around 3 % yesterday and it is down another 4 % today . "China shares fell heavily, tumbling more than 4 percent at one point. By midday, the key CSI300 index and benchmark SSEC (.SSEC) were down more than 9 percent for the week and over 10 percent from their early June peak. This week's correction was triggered by regulators' fresh moves to tighten margin financing - a key engine behind the market's frenzied rally - and was worsened by a tidal wave of initial public offerings that greatly increase share supply. "
amiret Posted June 19, 2015 Author Posted June 19, 2015 No it wont. Conviction it is already down 10% in the last few days since creation of this thread . today it was down over 6%. If i am not mistaken it is the 2nd 6% down move in 2months . " As the carnage began last night in China we noted the extreme levels of volatility the major indices had experienced in recent weeks. By the close, things were ugly with the broad Shanghai Composite down a stunning 13.3% on the week - the most since Lehman in 2008 (with Shenzhen slightly better at down 12.8% and CHINEXT down a record-breaking 14.99% "" http://www.zerohedge.com/news/2015-06-19/us-soars-chinese-stocks-crash-13-worst-week-lehman
amiret Posted June 19, 2015 Author Posted June 19, 2015 " Over 1000 Chinese Stocks were limit-down last night! the current crop of farmer/housewife-turned-trader has never experienced anything like this and so Monday's (Sunday night) open will be fascinating especially if Greek events are roiling. To put this in context, Chinese stocks lost almost $1 trillion in market cap last week - 10% of its GDP!"
amiret Posted June 26, 2015 Author Posted June 26, 2015 Are Chinese stock markets the most volatile in the world ? :hmmm: 4.8 % swings down and up , SSE Comp Down 3.5% yesterday and over 6 % today . Govt news agencies that functioned as Cheerleaders of the Stock market are now silent . Soon you may have investors demanding State intervention to re-inflate their Bubbles. :haha: Chinese Stock Plunge Leaves State Media Speechless Rising up from the center of Beijing, not far from the Temple of Heaven, is the loudest voice in the wild east of the Chinese stock market. It’s neither a bank nor a brokerage -- it’s the headquarters of Xinhua News Agency, long considered the “throat and tongue” of the Chinese government. With the heady exuberance over Chinese stocks starting to fade, sowing fears of worse to come, investors are scouring state media for clues to the Communist Party’s thinking. Only months ago, encouraging words from Xinhua sent stocks soaring. Now, with markets sinking, that official line has gone quiet, leaving many wondering how -- or whether -- Beijing might respond. Just how much China’s state media are used to telegraph government views on the markets is the subject of debate. Xinhua, founded in 1931 as the Red China News Agency, didn’t answer calls to its news hotline seeking comment. But analysts agree that Xinhua, a ministry-level government department, is too powerful to ignore. If nothing else, reports and commentary by state media sway investor psychology and can turn a rout into a rally -- or vice versa. “Investing in China stocks means you have to follow state media,” said Nelson Yan, the chief investment officer at the Hong Kong unit of Changjiang Securities Co. Government policy, after all, has been largely behind the world-beating 124 percent market gain of the past 12 months. Bubble Warnings : Morgan Stanley predicts more downside . Morgan Stanley cited increased equity supply, weak earnings growth, high valuations and the surge in margin debt for its pessimistic stance, saying the Shanghai Composite may fall as much as 30 percent through mid-2016. Strategists at BlackRock Inc., Credit Suisse Group AG and Bank of America Corp. all said last week that Chinese equities are in a bubble, while the median stock on mainland exchanges is valued at 85 times earnings -- higher than when the market peaked in October 2007.
amiret Posted July 3, 2015 Author Posted July 3, 2015 Down almost 27-30% since this thread began in just 3 weeks . On tuesday the SSE Comp underwent a 10% intraday swing. Still no reports of people jumping off skyscrapers. "China's securities regulator will investigate suspected manipulation of the stock market, state news agency Xinhua reports. The regulator said late on Thursday that it would be looking into whether parties were mis-selling financial products. The benchmark Shanghai Composite index has slumped about 30% since mid-June, wiping out most of this year's gains. "
randomGuy Posted July 3, 2015 Posted July 3, 2015 Markets can legitimately trade at as high as 100 p/e in a low interest rate scenario. P/E = inverse of Earnings yield. Lets say interest on fixed deposits is very low at say 1%, i.e. the earnings yield of fixed income investment is 1%. In such cases, markets can trade at 100 p/e+ (inverse of 1% i.e. 1/0.01) if the earnings outlook is not negative. I think the world is entering low inflation, low interest rate scenario for a loong time....
randomGuy Posted July 3, 2015 Posted July 3, 2015 Just googled that inflation in china was 1.2% in May 2015 and FD interest rate is abt 2.5%.... I guess if earnings outlook is stable than market at P/E of 50 wouldnt be a surprise..
randomGuy Posted July 3, 2015 Posted July 3, 2015 ^ wouldn't the US be similar ? Maybe...I guess earnings outlook is very important. As long as the earnings outlook is not bleak or earnings trajectory is not very negative, than these markets would sustain high p/e since interest rates are low.. Another unrelated thing that I learned is that American and European cos. are cash rich, so they have high dividend payout ratio. Indian cos. will re-invest largest portion of the earnings for future growth but American cos. pay largest portion of their earnings to the shareholders as dividend.
amiret Posted July 6, 2015 Author Posted July 6, 2015 Chinese Capitalists demand a socialist bailout to re-inflate their precious bubble. :haha: China has frozen share offers and set up a market-stabilisation fund, according to reports, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world’s second-largest economy. The Wall Street Journal report that Beijing has suspended initial public offerings (IPOs) came a few hours after major brokers and fund managers collectively pledged to invest at least $19bn of their own money into stocks. China’s government, regulators and financial institutions are now waging a concerted campaign to prop up the nation’s two main share markets, amid fears that a meltdown would rock the financial system and inflict heavy losses across an economy where annual growth is already running at a 24-year low. Familiar story . vociferous advocates of the free market have a tendency to beg for Govt bailouts when they are unhappy with the cards they are dealt. BEIJING/SHANGHAI (Reuters) - China's stock markets face a make-or-break week after officials rolled out an unprecedented series of steps at the weekend to prevent a full-blown stock market crash that would threaten the world's second-largest economy. The government is anxiously awaiting the market opening on Monday to see if the new measures will halt a 30 percent plunge in the last three weeks, or if panicky investors who borrowed heavily to speculate on stocks will continue to sell.
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