I suspect that that is an optimistic thought. Traditonally, the stock market in china has been a game for losers - a cheap way of betting for retirees. Kinda like the old OTB in NY. This new capital influx is interesting. Reminiscent of nasdaq, no? Now, the question is, how long will it last? Especially with them trying to raise rates consistently. (although cost of capital raising from 7% to 8% matters beans when you are making 50%). Good info, thanks.
Do not also forget Chinese thurst for gambling. If you study their history, it is in the root of their culture. Which the more I learn about it the more fascinating I find. When the Crash comes, 1929 might look like a joke unless the exchnages will enforce limit down.
i was watching cnbc early this morning and the asian reporter fleshed it out differently, than I have been able to find in print, and the way she layed it out, was that the chinease markets ae going gangbusters, and the citizens, investment companies, etc. are taking notice, and piling into the market, people borrowing from all kinds of places, but mainly, bank loans (via her report) but I bet it is credit cards, and other forms as well, and that an amazing amount of brokerage accounts were being opened every day, and it just seemed that this could be setting up for an unhealthy market plunge if things don`t go perfect in the global economy. I also noted that companies were unloading shares at a massive pace, which is somewhat disturbing. Cnbc hasn`t replayed this piece, and I thought it was really interesting, and they seemed to just gloss over it, and push the e-bay, pay-package of m-lynch, davos, china growth stories instead. THE REPORTER also discussed the fact that it is illegal to borrow from bank loans and invest in the stock markets, isn`t that what ken lay was found guilty of doing, is it illegal to do this, or was he found guilty of using his existing stock as collatoral for bank loans, which he signed documents saying he wouldn`t use to invest in the financial markets? Is it illegal to borrow money from credit cards and invest in the markets in the us, and is it strictly enforced, i would guess no to the second part. with all this liquidity, and escalating markets, you know there are some creative ways of raising funds to take advantage of this rare opportunity being employed.
Wow...one of the best post topics in a long time. Thanks Blue. Depending on the level of severity, this could be a once in a lifetime bubble burst opportunity. Could trump the 2000 burst because we can sit and wait for it. Will eagerly await any news on this subject.
<i>"Could trump the 2000 burst because we can sit and wait for it."</i> History repeats itself only because humans persist in insisting that "it's different this time." It ain't different in China, it ain't different in the US, now or ever. When extended markets correct, they do so with much more emphasis than the rocket ride up. We will see that in China, we will see the same thing in U.S. markets too. Nothing wrong with buying when the long signals exist. Just heed the short signals with equal emphasis when they come... extended markets will deliver equal to much greater profit potential coming down as they offered going up. For the most recent history lesson in this endless cycle, see below:
Oh yeah it can be different here than it was here...depends on the level of foreign investment of which we all know there is a lot of. The question is how high it goes...that's the difference. The government of China it seems wants a direct dealing in spurring the economy and markets by bending rules and in the end that can push the markets further than the tech market was ever pushed prior to 2000. The thing about those articles that's most scary is the insurance funds that have more money to buy into the market and if the government raises their ceiling on investments they'll have billions to invest more...but if they do that they'll just be inflating the bag more. They have 5% caps on 1.7 Trillion Yuan.
In China, there is no margin acount. Brokerage firms invent their margin accounts by finding lender A for individual investor B. Suppose B has $1m (stocks or cash) to invest, his brokerage firm finds someone A to match the same amount as a loan with a contract that B will return principal with interest (around 10%) after 1 year. A is responsible for trading and the firm will have 20% stop loss protection (i.e. when the net asset is 1.6 m) to protect the loan from A. The firm will liquidate the account. Within 1 year, nobody can withdraw money from the account. The stop loss is a way to protect the lender. This type of margin account makes the chinese stock market more volatile (like the margin account in us).