China in a bear market and no one is talking about it

Discussion in 'Trading' started by killATwill, Nov 30, 2007.

  1. If you define a bear market as an index losing 20%, then China's Shanghai index has stealthfully begun a bear market. Granted an ATR-based definition of a bear market would be more appropriate for China because its market is that much more volatile than the US's. Nevertheless, it appears that the index is stuck in its biggest drawdown in a long time and is doing so without attracting much attention. Funny how nobody seems to be talking about this in the United States, or internationally for that matter.
  2. Yeah, I've been keeping an eye on it and watching it cool off (again) from now 6k blowoff top. Disgusting how high it went a la Naz 99-00. I expect a bounceback soon before an inevitable 10% index drop one night. Shanghai just trades in a world of its own IMHO regardless of other world markets.

    Wonder if Hang Seng will nibble back to 30k+ level before quadruple digit dumpings again. Wouldn't mind another Asian Contagion.
  3. I spend some time in China. I can tell you public opinion of stocks is very similar to the US's during the tech craze.

    A buddy of mine lost about 30% in a week and then told me he wants to buy more. Now is the time to buy he says. No fear among a lot of people because dip-buying has been rewarding.

    Everywhere you see advertising for brokerage firms and PDAs that keep you abreast of your favorite stocks' charts: on the sides of buses and on the walls of elevators of luxury high-rises.

    Many here believe two strange myths that help them rationalize buy and hold: the Beijing Olympics will keep the parabolic spike going, and the government will keep share prices up. Needless to say, many shares can be shorted quite easily on US exchanges without the Chinese gov intervention that so many seem to believe in.

    Earnings for Chinese shares include the value of any stock holdings, marked to market. Therefore rises in the stock market trigger positive "earnings" suprises based on asset appreciation, which reinforce rises in the stock market. Any hiccup or sideways trading could easily cause an opposite effect - a negative wealth effect. In fact, it may have already started. Few seem concerned or interested in taking notice. Many are probably just buying more, ala 2000 for US tech stocks.
  4. The market halved from '01 to '05.
  5. Most people in China haven't had experience with a free market full stop!

    The closest they will ever get to a free market is haggling over chickens and eels at the outdoor slums in Shanghai.
  6. KillatWill,

    Interesting comments, especially your last paragraph. Do you happen to know some of the companies that are using their stock holdings as a source of earnings appreciation? or maybe their land holdings?


  7. The real move hasn't even begun.
  8. It is the accounting rule for not only China public companies, but Hong Kong as well. Companies could start using this accounting rule at 2005, and was fully enforced at 2006, i believe. (I have to confess that I don't actually know the exact date for enforcement) The same rule will come to US soon. Stay tuned.
  9. piezoe


    Useful comments. Thanks. Please keep us informed of what's happening in china markets.
    #10     Dec 1, 2007