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The Seven Reasons Behind The Record Surge In Chinese Stocks
While the US stock market has gone largely nowhere in 2015 despite Janet Yellen's most impatient desire to push the Nasdaq solidly over 5,000 in hopes that "this is the missing catalyst that will finally unleash the 7 years delayed wage growth "trickle down" Keynesian success story, others are focusing on European stocks, where earnings continue to decline but hope springs infernal that P/E multiples at record highs due to money printing are perfectly justified.
What most are ignoring, however, is that when converted into USD terms, European stock gains promptly evaporate courtesy of the imploding Euro. In fact, the only market year to date that has shown truly impressive gains in both local currency and USD terms, is also the best performing market of 2014 - China, which is now up almost 100% in less than a year!
But why? As we showed previously the collapse of China's shadow banking system, which directly leading to a collapse in China's GDP, has been instrumental in the mouthwater ramp in the SHCOMP over the past 8 months.
However, there are other factors as well. Here, with the full list of what may be causing China's relentless stock market surge, is UBS' Tao Wong.
With no significant change in China's macro or corporate fundamentals, the visible rebound in China's A-share market since November appears to have been largely liquidity driven. We think this, in turn, may have been fuelled by a number of factors including:
- new funds flowing into the stock market from household saving, real estate, commodities and trust markets;
- banks' bridge loans provided to investors who lost access to other high-yield shadow banking products as the result of tighter regulation;
- the PBC's easing of liquidity conditions via a variety of "targeted easing" tools (e.g. MSL, PSL, etc.);
- the official launch of Mutual Market Access (MMA) between the Hong Kong and Shanghai exchanges;
- long-term expectations for SOE reform and A-shares entering the MSCI index next June;
- increased use of leverage by retail investors via margin trading; and
- market sentiment being boosted by expectations for further policy easing. Meanwhile, February’s RRR cut failed to meaningfully lower China’s interbank rates, likely due to continued sizable capital outflows and significant liquidity withdrawals from China’s money markets by recent IPO applications.
The keyword in all of the above is "liquidity" which means none of the surge is driven by real, fundamental drivers. Which also means feel free to get on the ride, but remember to sell before the inevitable outcome of every single liquidity-driven rally: the crash.
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I'm still trying to understand Yuan vs. Gold
Yuan is copy of USD so gold/usd is same as gold/CNY. Nothing to understand here.
Please asshat, "crashes", especially in a communist, single-party, authoritarian system are not allowed. Move along.
//s//
Mikhail Gorbachev
If there is one market more opaque than ours it has to be China, so invest away and I'll sit here and watch....
Yeah, we missed the easy money. Nothing like jumping onto a parabolic rise.
MAED in full swing
http://www.cnet.com/news/yahoo-to-shut-down-operations-in-china/#ftag=YH...
There is an exodus of foreign factories last year. And infrastructure projects just simply can't absorb all excess labor. Going forward you would expect financial markets to become the chosen tool for the Chinese ruling Elites.
Blah blah fiat money driven market and China govt holds the key in thier 1.2 trillion in US Treasuries they can dump at any given moment and boom
Their surge pales in comparison to our surge.
Another attempt to spit on China fails.
https://www.youtube.com/watch?v=9lDN5b6ET0I
i wonder if there ever was a time when the entire global asset market all went bubble at the same time? 1920 perhaps?
Tyler when your base currency is euro and you borrow in $usd then convert those $usd back to euros, and buy euro equity markets you're still making money.
The loan is at a fixed eur/usd rate, so when you take profits in euros and convert them back to $usd, it doesn't matter that the spot rate has declined. You then take those $usd and convert them back to euros for a profit on the rate decline, plus the equity market profits.
We can discuss the semantics of purchasing power and nominal yields/gains, but on paper it's a net profit.
Sum Ting Wong!
Well, now we know where cashed-out banksters are sending the loot from Euroland.
NB: More proof not all the bad guys, or even most of them, can easily obtain Israeli passports. Tel Aviv is up "only" 15 per cent over the last year.
Chinese trophy wives? Much easier to get one of those.
8. Lloyd Blankfein lent them the FEDs market manipulating software applications.
How do you say BTFD in Chinese?
Curious goings on inside the Chinese walls--real estate bust, millions of rich fleeing, anti-corruption campaign, sky-rocketing SHCOMP. My guess is it's related to the Talmudic Dictum being exercised, once again, by the global banking cabal: "Never give a sucker an even break"...
are there metrics like p/e p/s etc or any kind of 'factset' service in china.....do they have accounting laws? I know there is no suchthing as private property in communist china, but maybe accounting for what the state owns?