The Bubble in China
So now that I've made my first ever blog, I can't stop! :)
I just wanted to post an excerpt from Pete's email, which clearly shows the bubble mentality in China. This kind of info/observations are always fun to look back upon after the crash. :)
Enjoy, Eddie
Being in HK, I feel like the dotcom period. Stocks are going crazy and people watching their porfolio's everyday. We're in the midst of setting up an asset management in China and the stories I hear will make you laugh. For instance, people ( i.e. farmers) choose stocks based on price...so lower the price, the more popular the stock. Also, they have a 10% rule...a stock goes up 10%, they cash out and look for something else.
The HK market is also very speculative based on China allowing funds to be invested into the HK market. The liquidity in China is unreal. I heard a story last week from a friend who works at UBS. During the recent holidays, someone broke into UBS office...when confronted the man revealed he had a whack of cash he wanted to invest...he wanted to open up an account. =)
posted by Junk Bonds @ 10/24/2007 07:35:00 PM
1 Comments:
J.K. Galbraith's book A Short History of Financial Euphoria is a good read. Among his observations include "the extreme brevity of financial memory" and the other is "the specious association of money and intelligence".
China is truly experiencing a bubble proportional to its size. The trouble is with calling when the top will occur. I've heard lots of things about how everything will hold out until after the Olympics. What I like to point out is that even when the United States was a growing industrial power, it suffered setbacks and severe recessions interspersed with strong growth. What is worrisome about China is that much of its phenomenal growth has been fueled by some speculative foreign direct investment, but much of it via bank lending. China doesn't have a very developed bond market for a country its size. Most of its growth has depended on bank lending often subject to local party politics as opposed to good loan risk management.
I recently thought the best way to play China was through more developed markets like H.K., Taiwan, or Singapore, but with the recent run up of the Hang Seng, i don't know anymore. I think the Hang Seng was up 1000 points the other day (i know on a base or 29 thousand, but still that's three percent!)
d.
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