Monday, May 28, 2007

China climbing to new highs / party on......

another day another record...... this performance reminds me more and more of the final stages of the nasdaq bubble..... i never could imagine that i would witness such an effort twice within 8 years....fascinating times.... and i´m proud that i havn´t tried to short this madness......thanks in part to the limited products available :-)

jeder tag ein neuer meilenstein....diese entwicklung erinnert mich immer mehr an die letzten zuckungen des nasdag 1999/2000...ich hätte mir nicht träumen lassen das ich etwas ähnlichens binnen 8 jahren ein zweites mal erleben an spannung kaum zu überbieten....bin ehrlich stolz das ich noch nicht der versuchung erlegen bin hier was auf der short seite zu probieren.....hängt wohl auch mit der schwierigkeit zusammen das die produkmöglichkeit hier noch sehr eingeschränkt sind :-)

May 28 (Bloomberg) -- China's CSI 300 Index rose above 4000 for the first time, driven by a surge in new investors who are ignoring warnings of a bubble to enter a market that's doubled this year.

China International Marine Containers Co. and Tsingtao Brewery Co. were among 11 stocks to rise by the 10 percent daily limit on the 298 member index. Jiangxi Copper Co. climbed after the price of the metal gained by the daily cap in Shanghai.

``There is lots of liquidity flowing into the market,'' said Fan Dizhao, who helps manage about $1.8 billion at Guotai Asset Management Co. in Shanghai. ``Even fund mangers dare not sell their shares at this stage, as no one knows when the rally will be over.''

The nation's Ministry of Education warned students not to get involved in stock trading because they may be unable to bear their losses if the investments turn sour, the official Xinhua News Agency reported today.

The benchmark CSI 300 climbed 87.33, or 2.2 percent, to 4072.58 at the close. Investors opened more than 300,000 accounts a day last week, even as former Federal Reserve Chairman Alan Greenspan called the rally unsustainable and said the market may undergo a ``dramatic contraction''.

China Petroleum, Asia's biggest oil refiner, also known as Sinopec, jumped 0.67 yuan, or 5.4 percent, to 13.07. China International Marine, the world's largest maker of freight containers, gained 3.17 yuan, or 10 percent, to 34.82. Baoshan Iron & Steel Co., China's biggest steelmaker, climbed 0.42 yuan, or 3.3 percent, to 13.12.

New Accounts
Households are shifting funds into the stock market, seeking better returns than they can get on their bank deposits. The central bank's benchmark one-year deposit rate, a ceiling for deposit rates commercial banks can offer, is 3.06 percent, little more than the nation's 3 percent inflation rate. The CSI 300 has risen 206 percent in the past year.


Investors opened 362,719 accounts at brokerages on May 24, the fifth straight day the tally has exceeded 300,000, according to figures on the China Depository & Clearing Corp.'s Web site. So far this year, 20.9 million accounts have been opened, four times the amount in 2006, the clearing house's data shows.

``This kind of bubble is not driven by fundamentals. It's driven by liquidity,'' said Agnes Deng, who helps manage $3.5 billion at Standard Life Investments Asia in Hong Kong.

>what a statement.........if it was driven by fundamentals it wouldn´t be a bubble.....

>was für eine aussage.....wenn etwas durch fundamentales gerechtfertigt ist kann es wohl kaum eine blase sein...

The CSI 300 is now valued at 46 times earnings, making the mainland market the most expensive in the Asia-Pacific region.

Risk Declaration
Greenspan last week joined central bank Governor Zhou Xiaochuan and Asia's wealthiest man Li Ka-shing in warning of a bubble on China's stock market. The index fell 0.5 percent the day after Greenspan's comment. It resumed its gains the next day, closing 1.7 percent higher.

The CSI 300, which tracks yuan-denominated A shares listed on China's two exchanges, has climbed 14 percent since May 6, when the central bank's Zhou said he was concerned about stock valuations. It also rose to a record after billionaire Li on May 17 said the market ``must be a bubble.''

The country's stock regulator last week ordered brokerages to make investors sign a declaration that they are aware of the risks when opening stock-trading accounts.

>hasn´t worked in germany and the rest of the world in 1999...helpless effort....maybe they should try/use a more drastical warning like this one..... :-)

>das hat bei uns und im rest der welt keinerlei auswirkungen gehabt...hilfloser versuch...evtl. sollten etwas drastische worte von seiten der offiziellen gewählt werden...... :-)

The pace of gains on the stock market has increased speculation that the government will take cooling measures.

``Some investors simply keep buying shares, since there were no crackdown measures by regulators,'' said Fan at Guotai Asset Management. .....

China Life Insurance Co., the nation's biggest insurer, gained 1.17 yuan, or 3 percent, to 40.20. Ping An Insurance (Group) Co., the second biggest, rose 2.56 yuan, or 4.1 percent, to 64.48.
Insurance companies have been approved in principal to invest in real estate in China, .... There are no policy restrictions regarding real estate investment by insurance companies, it said.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, gained 2.2 percent to 4272.11. The Shenzhen Composite Index, which covers the smaller one, added 2.4 percent to 1264.05.

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Blogger RodgerRafter said...

Hey Jan,

Yeah it's frothy over in China, but the government is doing a lot to make sure there won't be a big meltdown. They're draining liquidity from the banks by tightening reserves. They're restricting margin, which adds a whole lot of stability to prices. They're also raising interest rates to try and discourage speculation.

Tickersense had an interesting post where they showed that the stocks that foreigners could buy (B-shares) have gone up far faster than the stocks only Chinese could buy (A-shares). More than domestic investors, I think it's foreign investors who've been driving up prices. A foreign investor knows the RMB is going to keep strengthening, and for most the only way to play that is to buy Chinese stocks. Even if the Chinese market declines, most foreign investors will benefit from having Chinese assets as China appreciates.

8:10 PM  
Blogger jmf said...

hello rodger,

i saw this from ticker sense. thanks.

the interesting thing is that the b shares have lost almost 5% from the peak. the a shares have risen over 5% during the same period.

the government is acting, but very very slow and it feels like they are losing control to the speculators. you can´t blame them for putting money to work......if the chinese were serious about their bubble warnings they should do more drastic things.

The Chinese government recently raised the interest rate that a bank can pay on a one-year deposit to 3.06%, a jump of 0.27 percentage point from the prior rate. Inflation is China is running at about 3%, officially. And since bank interest is taxable, the return on a one-year bank deposit is actually negative.

i agree that the estimated yuan valuation plays a very big role in the surge (especilaly when you can borrow in yen.....)

here is a good take from juback

8:53 PM  
Blogger jmf said...

for everybody who is interested to watch the b shares quotes and chart etc here is the bloomberg quote


9:05 PM  
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11:18 PM  

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