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Matthew Cowie
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Financial Analyst for Mutual Fund Investor Guide; currently living in Beijing, China. Previously worked as a financial analyst for for Fidelity Independent Adviser Dion Money Management. Articles written have appeared on, Yahoo Finance, and Seeking Alpha.
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Investing in Chinese Stocks
  • Chinese real estate market on the verge of explosive price declines 0 comments
    Feb 27, 2012 4:55 AM | about stocks: TAO
    The news coming out of China conforms to the various stages of real estate bubbles. Activity has slowed because buyers anticipate lower prices and developers are holding back from selling, hoping for lower prices. The more aggressive firms, such as Vanke, were first to strike last year with big price cuts in order to move inventory. Now, we may be entering the stage where financial pressure forces the weaker firms into dumping properties. This will exert a major downward pressure on prices and reinforce buyer's expectations of lower prices.

    This is why I anticipate declines on the order of 40%. Declines of about 20% still dominate the news as the price cuts spread, but the overall declines are still around this level. In stage one of the decline, developers hope the government will step in and most people do not believe the bubble has burst. In stage two (or wave 3 after a small rebound if you're going by Elliot Waves), buyers and sellers realize the magnitude of the problem and prices plummet as buyers vanish and sellers worry about solvency rather than profits.

    For summaries of source Chinese articles, see:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: China, real estate Stocks: TAO
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