rlirph

Why Krugman Is Wrong About the Yuan

We have gone through almost forty years of twin deficits(fiscal and trade). We were 'brain washed' that we can have better living standards via free trades. Free trade does not work; 'managed trade' does. Look at all the up and coming economic power in Asia. No country has our free trade policy. We want more and cheaper goods to the detriment of our future...

Can China Sustain 8% Growth?

1) I do not trust accountants in China any more of our Big 4.
2) Your question is moot. If you genuinely think the Chinese products are tainted go back to your house and throw those poisonous products away. See how empty your house is!
3) No. Planet earth does not have resources to supply another billion people to a US standard of living. It just mean there are some of us will have a lower standard of living.
4) Chinese government's genocide is no greater than the European
killing off our native Americans.
5) Yes. I think we Americans are stupid and short sighted enough that we believe in free trade while running billions of trade deficits years after years. Our twin deficit(fiscal/trade) started when I was in college. Now I am near retirement.
6) Countries in Latin America could have come up years before China can but did not. Wonder why? There is no comparison between China and India. By the way have you ever visited China or India. When you have we can talk.

Finally stop bashing China for our problems. That is irresponsible! Next thing you can going to blame the banks for all the credit cards you run up!

- A US Expat Living In GZ


On Oct 23 10:47 AM Tom B wrote:

> Through 3 years: probably.
> Through 5 years: conceivably
> Through 10 years: bubble bursts-- just like "dot-coms"; Japan in
> the 1980's; Banks in the "2000's"".
>
> Think about it: 1) Do you trust their accountants? 2) Do you trust
> their poison/contaminated/da... products? 3) Does planet Earth have
> the resources to lift another billion plus people to a US standard
> of living? 4) Do you think the people will tolerate the Govt's continued
> genocide forever? 5) Do you think the US will buy into the poisonous
> concept of "free trade", without any checks and balances, forever?
> 6) What about Latin America--closer; better trained workers. What
> about India? Better trained workers; everyone speaks English already;
> FUNCTIONAL democratic Government.

Why I'm Buying Morgan Stanley China A-Share Fund

As of today the A shares in general trades at a 37% premium to its underlying H shares. This is reflected in looking at the Hang Seng China AH Premium Index. The underlying stock is identical except one is listed in China while the other one is listed in Hong Kong.

Because the China's market is closed to outsiders (including Hong Kong residents) stock prices in that market can be different than the same stock listed in Hong Kong. With the eventual opening up of China's financial market who will be willing to pay this 37% premium?

An US expat living in Guanghzou...

Quite a Reversal - China Central Bank Cuts Interest Rates

Governments are not to be trusted, whether they are Chinese or Americans. Do you really believe that we have an economic expansion of 3.3% last quarter? Or do you believe that our actual cost of living went up 0.1% last month? Or do you believe the core CPI after stripping out energy and housing costs? I think there are naive suckers every where.

Shanghai Should Continue to Sell Off

To those who can access Chinese newspaper the decline in Shanghai stock market is not surprising. You just have to understand a little bit about how the market comes about.

Maany years ago all companies are government owned (state owned enterprises, SOE). After all it is a communist country. A company will have shares, owned by different government agencies. The shares were not tradeable.

In 1979 the government started to reform the economy to a more market approach economy. Some companies were allowed to convert some of their shares to be freely tradeable, while a bulk of them were
still not freely tradeable.

Four years ago the government instituted a number of measures to make all the shares tradeable. They set a time table to make all shares tradeable in three years. This is similar to the lock up periods of the IPOs. Unfortunately the amount of restricted shares is more than the entire market capitalization of both the Shanghai and Shenzhen market.
At this rate it will be 2010 before all the restricted shares become fully tradeable.

Shanghai Should Continue to Sell Off

With a US$1.8 trillion foreign reserves the country can afford to pay for their mistakes along the way.

An Often Unmentioned Factor About Chinese Stocks

This article has several pieces of incorrect information:

One cannot use Yahoo Finance PE ratio to determine the market premium between the A shares in mainland China and H shares in Hong Kong. The reason is that data from Yahoo Finance is not always accurate!

For example China Life yesterday closed at RMB$24.02 in China and
at HK$29.50 in Hong Kong. After adjusting for currency China Life is only trading at 92.3% in China vs in Hong Kong.

For example PetroChina yesterday closed at RMB$11.36 in China versus HK$9.65 in Hong Kong. After adjusting difference in currency the premium of PetroChina is 34.3% in China, not 78% as the author claimed.

Yesterday the Hang Seng AH premium index stood at 106.49 which means the A shares as presented by the 50 stocks in the index is 6.5%
more expensive than its H share siblings.

Finally I like to point out that China Mobile is listed in Hong Kong and not in China which makes the comparison between its A share and H share valuation moot.

You can review the datat Hong Kong Hang Seng Bank:

www.hsi.com.cn/hsicn/e...

Want to See a Bursting Bubble?

Thanks for the beautiful insights! Does the editorial board at Seeking Alpha screen articles for quality?

Good Time to Buy Chinese Currency: Follow the 'Hot Money'

Michael Pettis wrote earlier about where the "hot money" went. It could not go into the stock market because it was halved in seven months. The hot money could not go into local real estate market because housing prices everywhere in China except Shanghai has been going down for the past eight months. The inflow of money if calculated correctly went to the "underground finance companies" which loan out money at 5% per month.

For those who live in China please check with your local business pals. I live in Guangzhou and their answers lead me to believe it is impossible for local small businesses to borrow from local banks. To obtain the funding they must borrow from "underground finance companies" which in the US would be called loan sharks.

Who is to blame? Naturally the Chinese government who set up those ridiculous capital control mechanisms. While the government complains about the amount of inflow of foreign capital do you know that I can not wire out the "foreign capital"? Once the foreign capital arrives and even if the money moves to a CD it cannot be converted back into foreign currencies and to be wired out.

Bullish on China After My Recent Visit

It is amazing to see so many people leave sarcastic negative comments yet their comments have no substance.

Beijing Ren do you live in China now? Does your six week stay in China make you a better person to judge China than some one who spends two weeks only?

To James do you speak Mandarin? Which secret Chinese society do you want to join? May be I can help you...what a joke!

I have been living in Guangzhou for two years now...a transplant from LA. Like every place it has its own benefits and drawbacks. You just have to figure which place offers the best combo. Meantime I have decided to stay...

How can you compare China with the US or any western country? - where people are making a fraction of what Americans are making?
China has many its own problems, just like any emerging country. It may come through with flying colors or it may not. It will be at least thirty years before one can make a sensible judgment.

Bullish on China After My Recent Visit

It is interesting to hear Mr. Farley had to say and I as a US citizen living in Guangzhou for two years appreciate his comments.

Why does any one has to jump on him because of what he said? It is the opinion of one person. Ever heard people are talking about how arrogant and self-centered the Americans are?

China is an emerging country. It still needs another 30 years before it becomes a threat to the US. Relax, everyone.... Meantime I listened to Jim Rogers and have moved every thing from LA to HK/GZ. I am sure that over a long haul it will be financially rewarding.

The Informal China Banking Sector is Growing

5% a month or 80% compounded annual interest rate sounds like borrowing from loan sharks which also come with deaths/broken legs if loans are not repaid on time. This kind of loan arrangement has always existed in Asia in recent times. That's why Household Finance opened finance shops in Japan.

Does any one know anything about PetroChina borrow money on this basis? The story was that last year PetroChina has money but cannot get them converted through official channels. The company was forced to borrow at ursury rates. I remembered reading the newspaper to that effect. When management was asked about it they gave a typical answer "I'll look into it and let you know" answer which raised more eyebrows.

Analyzing China's Declines

Every one knows that China is a third world country. China's stock market is an emerging market. May be the following numbers will give a more balanced picture.

Date Shanghai Composite Index
1/4/2006 1161
1/3/2007 2675
10/16/2007 6124 (intraday high)
4/22/2008 2991 (intraday low)
4/24/2008 3583 (closing)

The market had gone up 5.5x from 1/4/07 to 10/16/07. Even one takes the intraday low on Tuesday(4/22/08) the market had gone up 2.5x in 2 years 4 months. Is that bad?

When one invests in an emerging market one can have great returns with high risk. The returns also come with great volatility. Just look at the 14% gain today and yesterday.

In 1973 the Hong Kong Hang Seng Index dropped from 1100 to 153 in a year time. Now the Hang Seng Index is 25,000. China is similar to Hong Kong in early 1970's - lots of growth, lots of volatility but also lots of profits if one can take the ride. But to compare China's stock market with US stock market is both naive and ludicrous!

China's Worst Bear Market

I agree with James V, too many posters make half correct comments which I think is a disservice to the community. Some posters are still confused that there are indeed two Chinese stock markets for the mainland stocks - the mainland A shares and the Hong Kong H shares. The A shares and H shares are identical cousins but are traded at different market values.

When you buy FXI or Proshare Ultra you are buying or shorting the H shares. Again the same company stock can go in different direction on the same day. If you do not know what you are buying you are going to hurt yourself.

The other correction is that although many big enterprises are government owned (State Owned Enterprises) there are many more private enterprises which have come into the market. Those shares are not in the hands of corrupt government officials.

In summary China stock market is an emerging market. Just like Hong Kong in the 1970's we used to laugh at how immature and how volatile the market was. But who has the last laugh now...

For those who does not know Hong Kong market I bailed out the market in 1973 when the Hang Seng Index dropped to 153. Now it is over 25,000. China will be similar in a lot way. The market is full of great potential but there is a lot of volatility and hiccups along the way.

The recent pullback provides a great opportunity for people to get back in. I was in when Shanghai Index was 1800 and got out when it fell to 4800 after reaching 6100. Now I am very tempting to get back in... I am not sure if the bottom is 3000 or 1800.

If your goal is to make money where else do you have this opportunity to triple your money in two years?

China: What a Real Bear Market Looks Like

You are right that the only way for foreigners to participate in the A share market is through CAF. However, the A share is relatively expensive to the identical cousin, the H share which is readily available in Hong Kong.

What we are seeing is that even though China has a closed capital market, the market force is rebalancing the premium between the A share and H share. If you look at China Life, Ping An Insurance, China Railway Construction, and several others they are now trading at similar prices in Shanghai as in Hong Kong. However there are also a few companies such as CHALCO and PetroChina which are still trading at 70%+ premium in the A shares.

I would expect in a short time the price differential will be reduced to 10-15%. For that reason I do expect the A share still has some room to fall.

If you look at PE ratio, the A shares have been trading at PE 60+ last year. Now it has fallen to 27 and the Shanghai Composite Index closed at 3223 today. If the index drops another 50% to 1612, the PE ratio will be 13.5.

I am seeing that the A share is trying to build a bottom around 3100. If that fails it may drop all the way to 1600-1800. At that levels. the China stock market is truly attractive indeed!