Go Short in Chinese A-Shares

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  1. #11

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    This guy is arguing that the Bubble Theorists have Shanghai wrong:

    http://china.seekingalpha.com/article/36457

    Personally I think it's flawed: you cannot compare at least all companies listed in Shanghai & Shenzhen to Small Caps -> BOC, Bocomm, Sinopec etc. don't have too much in common with small caps.

    And yet again, as some other markets also have PE's above 40 it may just mean that there are also other bubbles to be bursted.


  2. #12

    Join Date
    Apr 2003
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    >> Me thinks that the govt cannot allow the collapse until
    >> after the Olympics.

    There is a lot more at stake than just the Olympics if you consider what a fairly wise man told me .. "As China goes, so goes the west".

    Chinese stock market crisis will lead to an international crisis, which will also in turn lead to a crisis on the production lines in China, affecting the population which China needs to keep under control.

    A few hundred billion dollars in bailout money is a lot cheaper than a repeat of that incident where the tanks had to be rolled out.

    Ignore the retail buyers (with less than USD100,000 as a hypothetical number) and you'll see that the markets are controlled by a relative few.

    There will be failures in the China market -- but those will be controlled failures, either to keep things from overheating or to set examples.

    I'm a very strong believer that the China and Hong Kong markets should not be messed with if you're a retail investor as pretty much everything is staged and controlled by a selected few.


  3. #13

    The only difference between a retail investor and a pro is that a pro dedicates more time to his trade. Apart from that, investing has become pretty much a level playing field where the pros have little or no advantage over the man in the street, if you discount illegal insider trading.

    The China stockmarket, unlike most other markets, is driven largely by retail investors. Many are pouring life savings, salaries, mortgaged loans and anywhere else they can get money from to blindly invest in stocks. And yes, it is going to be an ugly ending and I think in the not too distant future too. If you want to take advantage of that, you don’t need to invest directly in the China market. Any market will do. If a crash came about, it will have an immediate knock on effect throughout world markets, which will all probably crash pretty much simultaneously. You saw this happening in the tiny mini crash couple of months back. There is no knowing what the catalyst for a worldwide crash will be. It can come from anywhere from a dollar collapse, housing collapse in US, shooting interest rates in UK, war in Iran, China banking crisis and so on. The global credit bubble is building up to one spectacular bursting point and it will take very little to push it over the edge. Whether China affects world markets or vice versa, the result will be the same – a global crash.


  4. #14

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    The problem with the China bubble ( and yes we all saw it two months ago) is that they are exporting some of the bubble to the regional markets.

    We just have to look at what happened two weeks ago -to stem the local chinese mkts, the autorities there decided to let the QDII (Domestic Instituiotnal Investors) to buy HK stocks. Of couse, last Monday we saw the highest turnover on the HKSE.

    The sad thing is that this feeding frenzy is going down to the lower ranks i.e. the poor people who are putting their life savings on the markets.

    When you are talking about the masses, you mess with their money and you mess with the population.

    This frenzy has to end....soon.


  5. #15

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    qdii is not immediate effect.
    the high turnover is because of speculators outside china buying hk stocks.

    in the first place, many of the SZ investors already have hk account trading hk stocks... 8-P


  6. #16

    Money

    I didn't look at the thread for a day and out of a sudden there is a big discussion. I like Geoexpat :-)

    But let's come back to what we are all interested in: making money. Of course, everyone should decide on its own IF he/she thinks that there will be a crash and IF he/she wants to make money out of that.

    So, from my professional experience and also from what I hear here, it seems like we cannot short A-shares, sell Index futures or buy puts on A-shares. Question is now. Which index, share etc. outside mainland China, do you think has the highest correlation to Chinese A-shares?

    Personally I am a little undecided. On the one hand I could well imagine that HK will be down when China is down. On the other hand, HK stocks are not overpriced. But maybe one of you guys has a better hint on what could be highly correlated?

    I would like to be very well prepared :-)


  7. #17

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    Dec 2005
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    Let me know before you go short on HK market, so I can get ready to buy some shares.


  8. #18

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    actually btw, there is technically a A share futures (xinhua A25 or 50.. the one that's based on shanghai A shares) traded in singapore stock exchange. for retail investor i think it's ok. if you do your homework and are not dealing at too high or low a price from the market, it shld work! 8-P


  9. #19

    No

    Seamale, no worries. I won't do that.


  10. #20

    When the time comes to go short massively, I hope there are plenty of people like Seamale cos somebody has to take the other side of the trade

    Everything is correlated to everything else so you don't have to bust your brains out for what to sell in the event of a crash. Everything will go down simultaneously as a result of widespread panic selling. So just sell Hang Seng, Dow, FTSE, whatever you can get your hands on. I wouldn't recommend dealing in this xinhua A25 (never heard of it myself), even if you could because it would probably difficult to find a broker for it, and the spread would probably be quite wide, and it would probably be harder to deal in it (liquidity issues). Correct me if I'm wrong. Just stick to the main indices.