The bull run just begin. Shanghai composite index reach its low at 1000 in June 2005 but now already reached all time high at 3851. The bullish momentum has attract many retail investor to open trading account. For the whole year of 2005, only 850k of new trading account has opened. As of 04/27/07, daily new trading account has swelled to 310K. The number is expected to increase after the 5.1 long holiday. Everyday people queue for hours just to open a new trading account. With just 7% of population opened the trading account, shanghai stocks still have plenty upside.
Yeah... that is if china's leaders don't give a crap about their economy as their US counterparts. If they do, they will curb it very very soon. It doesn't matter how many people there are wanting to buy, all that matters is if the valuation is high or low.
The bull will run out of steam soon. It's as crazy as Nasdaq in 2000, if not more. It's gotten people "investing" all of their net worth and then some into the short term craze. We'll see how it end up, but in a market where no one can short, a down fall won't be pretty... -eraci-
I expect a truly china ETF that tracks that index come just around the top, when it comes out it will be time to short
try long or short FXI; interestingly, lately, even though Shanghai index keeps climbing, FXI does not move up, or even down.
I recommend DEW, DFE, and GF They follow the european indexes and have performed very well for the past year. The shanghi index will probably undergo a large correction, but it wont affect the other markets signifiganty since China's economic growth will still remain very strong.
Chinese Spurn Bank Savings in Favor of Booming Stock Market May 4, 2007 at 11:00 pm · Keen for a piece of China's red-hot stock market, people all over the country are withdrawing money from their bank accounts to invest in shares. Experts warn this could be a risky move. They say the market boom is a bubble waiting to burst, and that many retail investors could be hurt. Claudia Blume reports from VOA's Asia News Center in Hong Kong. A new survey by China's central bank shows that just over half of the respondents regard bank deposits as their most important financial asset, the lowest level on record. An all-time high of 30 percent - up from 19 percent a year earlier - believe it is better to invest in the stock market. All over the country, people are rushing to banks to withdraw their money and buy stocks. "Now that the stock market is booming, they are sort of catching the fever and think it's an easy way to make money," said Robert Broadfoot, who runs a political-risk consultancy in Hong Kong. Chinese retail investors are opening new share trading accounts at a rate of more than 200,000 a day. The Shanghai and Shenzhen stock markets are reaching new heights because of all the new money pouring in. The market mania started last year, when the Shanghai Composite Index surged 130 percent in value. The government has repeatedly warned investors of the risks of an overheating market. Liang Zhou, a research manager in Shanghai for Lipper, a company that studies investment fund performances, says many new investors - people such as students, office workers and retirees - are willing to take risks. He says many have a gambling mentality and they had no experience with China's last stock market collapse, six years ago. "New investors don't [didn't] suffer from the recession of the stock market, from the decrease of the stock market, so they are more emotion[al] even in such a red-hot market now," he said. Broadfoot says the small investors bear most of the risk if the market collapses. "The two major groups that we are really worrying of becoming over-exposed in a bubble market are, one, poor people that can't afford it and secondly, groups that maybe borrowed from the banks for purposes of investment," he said. Broadfoot says some people who take loans to invest in the stock market tell their banks they need the money for other purposes. He says if the market collapses, there could be an increase of non-performing loans.