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Thread: Market turmoil and economic downturn in China

  1. #16
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    citanon,

    The graphs posted above start with the assumption that the kinds of trend analysis that has been useful in modern stock markets will also apply to those in China. I do not think this is a useful assumption, as China’s stock markets are closer to casinos than to well-regulated, Western-style markets.

    As for nominal GDP growth, 2% inflation and 6% real growth would be 8% nominal, which is about the same (8.2%) as in 2014. Adding Rmb5 trillion to the economy in 2015 would be somewhat similar to the amount of nominal, renminbi increase of the past few years, and it would be more than the Rmb4.84 trillion added in 2015 I mean 2014. Whether they are accurate or not is an entirely different matter.

    Finally, Forbes has never been exactly neutral on China (swinging from raging bull to bellowing bear), and zerohedge is just bad. Have a look at some of their comments from a couple of years back and you'll see what I mean.
    Last edited by DOR; 27 Aug 15, at 03:48.

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  3. #18
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    From the looks of things both US and Chinese markets are having the same sort of debate we are having here. The result: continued turbulence.

    http://www.cnbc.com/2015/08/25/us-ma...-recovery.html

    Dow:

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    Shanghai Composite: Name:  sh000001.png
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    Last edited by citanon; 26 Aug 15, at 09:10.

  4. #19
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    “Turbulence”?
    I don’t see any turbulence.
    What I see is a market in free-fall, seeking a bottom.

  5. #20
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    Quote Originally Posted by DOR View Post
    The graphs posted above start with the assumption that the kinds of trend analysis that has been useful in modern stock markets will also apply to those in China. I do not think this is a useful assumption, as China’s stock markets are closer to casinos than to well-regulated, Western-style markets.
    Nothing of the sort has ever occurred in our " well-regulated, Western-style" markets... but but...

  6. #21
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    The Chinese stock market fiasco continued today as thoisands of individual stocks fell by their daily limit. Around mid day the government managed to prop up the stock index by buying bank shares. However this contributed to the the losses of other stocks as investors abandoned them for safety of the banking stocks. Individual investors took another hit. Its becoming clear that last week's market stabilization measures by the PBOC have failed. Further collapse of the market is imminent.

    Meanwhile, the government has detained the china country director of Britain's Man Group to "assist" in investigation of improper stock trading, and a financial news reporter and former regulator showed up on TV last night read scripted confessions (I kid you not) of their nefarious deeds (spreading false financial rumor and insider trading respectively). To date, over 100 people ranging from financial regulators to investment managers to reporters have been arrested on charges ranging from insider trading to malicious selling to spreading rumors.

    Meanwhile, manufacturing survey data hit a new multi-year low.

    Still, the mystery remains: why is the government seemingly so desperate to arrest collapse in a market that should be well insulated from the real Chinese economy? Is it really just for image sake (seriously???) Or can the camel no longer suffer another straw?

    More food for thought: if the national government is blowing hundreds of billions of US dollars (and apparently selling treasuries to finance it) to pull these types of shenanigans with something as transparent as the stock market, what do you think the corrupt provincial and local governments are pulling with less transparent measures like GDP tallies?
    Last edited by citanon; 01 Sep 15, at 10:44.

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    Quote Originally Posted by JAD_333 View Post
    Commenting on the articles you posted, the first one called the Chinese real estate mogul a Chinese Warren Buffett. Actually he's the opposite of Buffett. He's selling into a falling market, whereas Buffet would be buying, and furthermore, Buffett rarely sells his holdings when times are bad. Of course, that doesn't mean the Chinese real estate market isn't a basket case, which it seems to be. I think China will grow into its excess real estate. But until then it will be a buyer's market, which isn't all that bad for consumers. That part of China's GDP concerns me less than the manufacturing sector. We'll see where the latter is heading after the currency devaluation has had time to work its "magic".

    The article about decreasing electric usage is interesting, but decreasing usage may or may not be the result of a slowdown. The analysts have some work to do to make the correlation between the two. There are other explanations, such as increased efficiency.
    Jad, a comment about Li Ka Shing:

    First here is his bio: https://en.m.wikipedia.org/wiki/Li_Ka-shing

    Notice the "honorable sir". That's right, he is a knight commander of the British Empire.

    For the past several decades, he has been, arguably, the single most powerful businessman in Asia, and also the richest. His family operates major infrastructure businesses throughout the world. For example, he controls 13% of all of the world's container ports. In the late 70s and early 80s, when China first decided on the path of economic reform, he was one of the first people the Chinese government reached out to to bring in investment into the country. Subsequent the Li's developed close relationships with the national leadership itself.

    My point is this: the Li's probably have the best, the most extensive real economic information about china of any organization or commercial entity on earth, probably better than the central government itself. They are not simple investors but develop and operate complex large scale businesses around the world. They have been at the center of China's economic reforms since day zero, and they have been the single most shrewd playyer in asia since the 1970s.

    Their leaving china now could only mean that an objective, well researched conclusion has been reached (using best, most extensive and genuine information available on China) that within the time horizon of theIR businesses, Europe will be considerably more attractive operating arena than china, enough so to burn bridges to leave.

    That could only mean one or both of two things.

    Thing one is that they have fallen out of favor with Beijing.
    Thing two... you can guess.

    http://www.dailymail.co.uk/wires/afp...ina-slows.html
    Last edited by citanon; 01 Sep 15, at 11:32.

  8. #23
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    Quote Originally Posted by citanon View Post
    More food for thought: if the national government is blowing hundreds of billions of US dollars (and apparently selling treasuries to finance it) to pull these types of shenanigans with something as transparent as the stock market, what do you think the corrupt provincial and local governments are pulling with less transparent measures like GDP tallies?

    Are you suggesting that the Finance Ministry has convinced the People’s Bank of China to hand over the foreign exchange reserves? That’s the only place you’d find that kind of volume of T-bills, and since it’s totally outside the reach of the MOF, there’s about zero chance that something like that would have happened.




    Their [Li Ka-shing's family)] leaving china now could only mean that an objective, well researched conclusion has been reached (using best, most extensive and genuine information available on China) that within the time horizon of theIR businesses, Europe will be considerably more attractive operating arena than china, enough so to burn bridges to leave.
    I spoke with Victor Li, KS's heir, a few weeks back (he's on our board). His family has no intention of "leaving China."

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    Quote Originally Posted by DOR View Post
    Are you suggesting that the Finance Ministry has convinced the People’s Bank of China to hand over the foreign exchange reserves? That’s the only place you’d find that kind of volume of T-bills, and since it’s totally outside the reach of the MOF, there’s about zero chance that something like that would have happened.
    I'm saying that t bills are in fact being sold by china:

    http://www.bloomberg.com/news/articl...r-yuan-support

    Speculations on what could or could not take place between different branches of the Chinese government is largely academic when the market activity is plainly present. The $$$ may be going to support the currency but the fact that the currency is being pumped out to buy junk stock is no doubt contributing to its weakness.

    I spoke with Victor Li, KS's heir, a few weeks back (he's on our board). His family has no intention of "leaving China."
    Actions speak louder than words.
    Last edited by citanon; 02 Sep 15, at 05:00.

  10. #25
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    China dumping T-bills? Sorry, the data don’t support that assortment. . .
    MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES . (in billions of dollars)
    HOLDINGS 1/ AT END OF PERIOD
    Jun 2014 $1,268.4 billion
    Jul 2014 $1,264.9
    Aug 2014 $1,269.7
    Sep 2014 $1,266.3
    Oct 2014 $1,252.7
    Nov 2014 $1,250.4
    Dec 2014 $1,244.3
    Jan 2015 $1,239.1
    Feb 2015 $1,223.7
    Mar 2015 $1,261.0
    Apr 2015 $1,263.4
    May 2015 $1,270.3
    Jun 2015 $1,271.2

    As for Victor, I'll take him at his word. And, I'll also bear in mind that selling an asset or two may very well be good business sense rather than a decision to abandon China.

  11. #26
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    The article explained why there could be inconsistent data, not to mention its about actions in August. Your data goes up to June.

    Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals.
    As for the Li's, the actions speak for themselves and discretion about ones own future plans is clearly prudent. Clearly they are going short on the mainland in favor of plays elsewhere. Hardly anyone expects them to give up operations in HongKong under any circumstances, and last I checked, Hong Kong is still a part of china.

    I don't expect you to grill him on the fine details there on my behalf. ;D
    Last edited by citanon; 02 Sep 15, at 11:57.

  12. #27
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    Some additional analysis about the larger picture in China.


  13. #28
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    The only data available is to June, maybe July.
    There is no official August data.

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    i know, this is a case where the official data lags current events. from the article the sell off wasn't huge. over 106 billion was reported.

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    http://www.wsj.com/articles/li-ka-sh...ing-1441567980

    Article posted here in entirety because it's behind pay wall.

    -----------------------------------------------------------------------------------------------

    Li Ka-shing’s Moves on China Reveal Good Timing
    Hong Kong tycoon has been trimming his reliance on the world’s second-largest economy
    By Wayne Ma
    Sept. 6, 2015 3:33 p.m. ET

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    HONG KONG—As investors around the world fret over China’s economic tremors, Hong Kong tycoon Li Ka-shing has less reason to press the panic button: he has been quietly accelerating moves to cut his reliance on the world’s second-largest economy.

    Mr. Li, nicknamed Superman in Hong Kong for the business acumen that made him one of Asia’s richest men, has been trimming his property portfolio in China since 2011. He has also sold off parts of his ports and retail holdings in Hong Kong, which is a conduit for China’s international trade and finance.

    Instead, the 87-year-old tycoon has pivoted his two main conglomerates—Hutchison Whampoa Ltd. and Cheung Kong Holdings Ltd. —toward the old world of Europe. He has spent more than $20 billion in the past 18 months on deals that include buying the U.K.’s second-largest mobile-phone operator, a Dutch drugstore chain and a U.K. train-car maker, as well merging his Italian telecommunications company with a larger rival. Those deals were valued at more than his combined European acquisitions in the previous decade.

    Even before the spree, Europe had overtaken Greater China as the biggest contributor to Hutchison’s operating profit, by a small margin, in 2012. Last year the region accounted for 42% of the total, as Greater China shrunk to 30%.

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    In a sign that easy returns from the boom years of China may be over, three people close to Mr. Li’s business say the moves were spurred in part by his belief that he can make more money in Europe—long seen as a collection of plodding economies—than in China, hitherto a magnet for investors because of its rapid growth rates. Company officials have said that the size and scale of investment opportunities in Europe exceed those of Hong Kong, where there is little left for Mr. Li to plow funds into.

    Now, as global markets stumble on concerns over China’s slowing economy, falling stock prices and a sudden devaluation in the Chinese currency, Mr. Li’s moves appear prescient, cementing his status among investors as an oracle. Company insiders and academics who study Mr. Li, however, say that the tycoon was also motivated by a weak euro that made European assets offering steady returns cheaper relative to China.

    “What Mr. Li really excels at is the timing of his selling,” said Woody Wu, an accounting professor at the Chinese University of Hong Kong. “He sells as long as the price is right. He’s a genius when it comes to finance.”

    Mr. Li, who is valued at $24.8 billion by Forbes as of Sept. 5, presides over an empire that is divided roughly into quarters: property, telecommunications, ports and infrastructure as well as retail and energy. Earlier this year, Mr. Li folded his two flagship firms together into CK Hutchison Holdings Ltd. and spun off their property businesses into a separate company, Cheung Kong Property Holdings Ltd. The companies’ combined market value is about $77 billion.

    Mr. Li and CK Hutchison declined to comment. Cheung Kong Property didn’t respond to emailed questions.

    ‘What Mr. Li really excels at is the timing of his selling.’
    —Woody Wu, professor at the Chinese University of Hong Kong

    Both companies outperformed Hong Kong’s benchmark Hang Seng Index, which has fallen nearly 24% since June 12. Shares of CK Hutchison are off 10% over the same period, while the property arm took a 21% hit, showing Mr. Li isn’t immune to any slowdown in China.

    Most of Mr. Li’s property portfolio is in China and nothing thrills Mr. Li like a development deal, according to two people who have worked closely with him. When entertaining clients over bowls of pili nuts at his office on the 70th floor in Hong Kong’s central business district, Mr. Li once pointed to the city’s skyline and boasted that one in eight buildings were made by him, according to a person who has visited him.

    He was among the first foreign developers to enter China after its leader Deng Xiaoping, with whom Mr. Li had close ties, began opening up the nation’s economy. He retained good relationships with subsequent presidents Jiang Zemin and Hu Jintao, although he is seen by China watchers as less close to the current president, Xi Jinping.

    In 2008, Mr. Li surprised observers when he sold a 40-story office tower in the heart of Shanghai’s blossoming financial district to a private investor for 4.9 billion yuan (US$769 million). Three years later, the building fetched a half billion yuan less when it was resold as the market dipped, people familiar with the matter said at the time.

    Mr. Li hasn’t made any significant land acquisitions in China since at least 2012 and has sold off malls and housing developments.

    “It shows [Mr. Li’s companies] are bearish on the market going forward,” said Samuel Hui, a conglomerates analyst at broker CLSA.

    One person close to Mr. Li said he had lost the advantage in know-how for construction that he held in the 1990s in the face of competition from rising Chinese property moguls such as Dalian Wanda Group’s Wang Jianlin, who has replaced Mr. Li as Asia’s richest man.

    Other potential motives attributed by company insiders and academics for Mr. Li’s step back range from the possible souring of his relations with the nation’s power brokers, to the tycoon preparing to hand over the business reins to his eldest son, Victor Li.

    “The more important reason why he’s moving away from China is that his influence there is dissipating,” said Joseph Fan, a finance professor at the Chinese University of Hong Kong who has studied Mr. Li’s career.

    In Hong Kong, where Mr. Li started his empire manufacturing plastic flowers in the 1950s, he has shifted the domicile of his businesses to the Cayman Islands. Last year, he sold a quarter of his Hong Kong retail chain to Singapore sovereign-wealth fund Temasek Holdings Pte. Ltd. Most recently, Qatar’s sovereign-wealth fund bought 16.5% of his electricity assets in the city.

    People close to Mr. Li say he remains in empire-building mode.

    “You still see that energy and strong interest into making deals—megadeals,” said a person familiar with Mr. Li. “I don’t see that he’s tired of doing this.”

    —Esther Fung contributed to this article.

    Write to Wayne Ma at wayne.ma@wsj.com
    Last edited by citanon; 07 Sep 15, at 00:32.

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