Every week that passes China is doing something new and just off the charts to charge up their failing markets and economy, this is the warning sign, I'm telling you now if you think the crisis of 2008 was bad the world has not seen anything yet....this is a telling sign of desperation, the world financial markets are going to collapse making the last crisis look like nothing ever happened. China OKs pension funds to pour $97B into market 2 Hours AgoReuters China Daily | Reuters An investor looks at an electronic board showing stock information in Hangzhou, China, on Aug. 18, 2015. China on Sunday allowed pension funds managed by local governments to invest in the stock market for the first time, potentially channeling hundreds of billions of yuan into the country's struggling equity market. China published a draft rule on the move for public consultation on June 30, at the height of a recent stock market rout. The State Council, or cabinet, published the finalized rules on Sunday after shares slumped nearly 12 percent last week, the worst weekly performance since June. The Wall Street Journal also reported Sunday that the People's Bank of China is preparing to add liquidity to its banking system, adding that the move could come before the end of the month. Despite a series of official measures aimed at supporting the market, investor sentiment has remained fragile amid continued signs of slowing economy. Pension funds will now be able to invest up to 30 percent of their net assets in the country's stocks, equity funds and balanced funds, according to rules published on the State Council's website. Previously, the pension funds could only invest in bank deposits and treasuries. Together the funds have assets of more than 2 trillion yuan ($322 billion) that can be invested, meaning about 600 billion yuan ($97 billion) could theoretically go into the stock market, state media has estimated. According to the new rules, pension funds can also invest in convertible bonds, money-market instruments, asset-backed securities, index futures and bond futures in China, as well as the country's major infrastructure projects. Local governments can mandate institutions authorized by the central government to manage the pension funds.
Really? Any more reckless than allowing 401k account holders to trade futures and options contracts in the US? Let's keep things in perspective here. I think the Chinese government and central bank run a much more prudent long term strategy than all Western governments and central banks combined. Or what about all those private equity investors and hedge fund owners who declare most of their earnings as capital gains rather than income like every other ordinary citizen? Before anyone in the UK or US starts staring China from the top down he/she should possibly remind him/herself of the status quo in their own countries....you know....just to have a benchmark to compare against. And for heaven's sake, what inevitable? The slowdown in growth from 7 to 5%? Even 5% for the next 15 years in China will rip the US further apart and will cement China as the next super power.
Very Very Very good point.... I don't pretend to think that the US is on the cutting edge of financial health.... I'm thinking there is alot of buried leverage to be blown out
"funds managed by local governments" FUNDS vs individuals man, c'mon. Do you really think it's a good idea for China to be basically saying "hey pension funds, go ahead and invest in the market." right now?
for how many decades do US pension schemes and buy side mutual funds now invest in equities? 7 decades? A century? Even government or state pension funds do. Maybe you wanna take a look at the holdings of Calpers?
Nothing wrong whatsoever with funds investing in equities. That's not what I'm saying at all. I'm saying angling for local governments to do it NOW probably ain't the best idea.
how is it not the best idea for a long-term oriented fund to pick up equities at up to 50% discount? Unless of course your economic growth target for China is in the 2-3% range. I think a realistic target for the next 10-15 years is a 5% growth level. Equities had to correct at some point and that has happened. Give it another 10% or so during which funds will pick up more on the long side and I would say those are pretty good entry levels for a pension fund with very long holding periods.