Storm warning: China is headed for an epic hard landing

[Galaxy]

Stock market ups and downs have much more to do with sentiment and momentum than the economy in the short term. Whenever sentiment is positive or negative it usually does not change very fast. But in more mature markets a decline more than 20% is considered a bear market. Indian market is tied more to energy than Chinese market that is why I think it has not advanced?? Especially when during the period of growth in India you mentioned the price of oil doubled.

Well, There are many factors in Equity Market. Sentiments also play important role. 1 month back, Everyone was expecting Sensex at 14,400 when it was 15,400 but today it's 16,400 and most of the fundamentally strong scrips are up between 20%-50% in just 4 weeks. Nothing changed fundamentally but still. Smart one still made money.

It's because market moves because of big money which we call smart money. They invest according to fundamental valuation & global news which is not known to many. Also, There is large chunk of trading takes place by Arbitrageur and Hedge funds and for them, No movement is best move.

Now, on Topic: Why Chinese market had underperformed ?

3 reasons.

1> Because it performed exceptionally well in 90's and till 2007 (till global recession). Valuation was astonishing high like other Emerging market. So, it's consolidating to justify the valuation. IMO, Hang Seng index valuation is fine and in next 4-5 years, It will more than double. Can't say about Shanghai as volume is less and international participation is less.
2> FII's were not investing in Emerging market for last 3-4 years for many reasons.
3> There is a big problem in China. (Competitive export margin and high input cost)

According to my analysis, Both India and China will do well in next 5-10 years. After 2020, India will move ahead and China growth will be very less.

 

[trackwhack]

It is not the jealousy but what goes on behind the door with in the state controlled Banks and industries is the reason for concern not only to the world but as well as should be of concern to every citizen of your country. Just look at the ghost cities with in China( You cannot deny the information ) and the recent layoffs in the coastal region based industries.

One example I will give you as experienced by stockholders of a company listed on Toronto Stock Exchange that was Sino Forest which cooked up the books about its forest land holding and the whole thing was exposed by a investor from West. I am sure there are more such entities with in China which have not been exposed as yet.

Watch this video, this guy had predicted Sino Forest going broke and asked investors to short it a long time back. Could have made a trucload of money if I'd listened then. Now the horse has bolted. Its a long video but worth watching. Tells us what the real problems that China face are. Its a lecture, no fancy video footages.

I had posted this earlier on this thread http://defenceforumindia.com/economy-infrastructure/27842-stop-china-bashing-watch.html

 

[ice berg]

According to my analysis, Both India and China will do well in next 5-10 years. After 2020, India will move ahead and China growth will be finished.

Where is your "analysis"?

 

[LETHALFORCE]

Well, There are many factors in Equity Market. Sentiments also play important role. 1 month back, Everyone was expecting Sensex at 14,400 when it was 15,400 but today it's 16,400 and most of the fundamentally strong scrips are up between 20%-50% in just 4 weeks. Nothing changed fundamentally but still. Smart one still made money.

It's because market moves because of big money which we call smart money. They invest according to fundamental valuation & global news which is not known to many. Also, There is large chunk of trading takes place by Arbitrageur and Hedge funds and for them, No movement is best move.

Now, on Topic: Why Chinese market has under performed ?

3 reasons.

1> Because it performed too well in 90's and till 2007 (till global recession). Valuation was astonishing high. So, it's consolidating to justify the valuation. IMO, Hang Seng index valuation is fine and in next 4-5 years, It will more than double. Can't say about Shanghai as volume is less and international participation is less.
2> FII's were not investing in Emerging market for last 3-4 years for many reasons.
3> There is a big problem in China. (Competitive export margin and high input cost)

According to my analysis, Both India and China will do well in next 5-10 years. After 2020, India will move ahead and China growth will be finished.

Chinese have a huge real estate bubble do you think when it pops they will continue 5-10 years of growth??The Japanese real estate bubble popped 25 years ago and they still have not recovered. Chinese banks/economy are backed by worthless US bonds would you as an investor feel good investing knowing this?

 

[Galaxy]

Where is your "analysis"?

I have not yet posted the reason. Only gave my opinion. I can post unlimited things about stock market.

I don't think, you even know about your own equity index. lol

 

[Galaxy]

Chinese have a huge real estate bubble do you think when it pops they will continue 5-10 years of growth??The Japanese real estate bubble popped 25 years ago and they still have not recovered. Chinese banks/economy are backed by worthless US bonds would you as an investor feel good investing knowing this?

It will sustain minimum 5 more years.

China has one advantage of low current account deficit as well as huge trade surplus.

Biggest problem for Chinese market would be "Middle-income Trap", Most likely by end of this decade. China will never become like S.K. or Japan.

 

[LETHALFORCE]

It will sustain minimum 5 more years.

China has one advantage of low current account deficit as well as huge trade surplus.

with trade wars looming and rising wages this maybe more realistic;until the real numbers are revealed and US finds cheaper alternatives.

 

[LETHALFORCE]

Biggest problem for Chinese market would be "Middle-income Trap", Most likely by end of this decade. China will never become like S.K. or Japan.

Compare Chinese PPP to Japan or South Korea and you will see they are not even in 20% range.

 

[Galaxy]

with trade wars looming and rising wages this maybe more realistic;until the real numbers are revealed and US finds cheaper alternatives.

Although, I agree that many internal economical data of China are hidden.Still, They have sufficient strength in economy to continue its growth trajectory for next few years.

Input cost is major problem for China. It's real problem. But even things to change upside down takes sometime. They have controlled inflation, they still have advantage in manufacturing. As of now, There is not much competition for China. India, Vietnam, Latin America are still behind in that segment.

So, for next few years. They will sustain most likely. Only exceptional is Political reason which no one can predict specially about CPC.

 

[ice berg]

I have not yet posted the reason. Only gave my opinion. I can post unlimited things about stock market.

I don't think, you even know about your own equity index. lol

LOl, you dont even know what country I reside in, and you presume to know what I know? Ha ha ha.

 

[LETHALFORCE]

Although, I agree that many internal economical data of China are hidden.Still, They have sufficient strength in economy to continue its growth trajectory for next few years.

Input cost is major problem for China. It's real problem. But even things to change upside down takes sometime. They have controlled inflation, they still have advantage in manufacturing. As of now, There is not much competition for China. India, Vietnam, Latin America are still behind in that segment.

So, for next few years. They will sustain most likely. Only exceptional is Political reason which no one can predict specially about CPC.

70% of China's economy is dependent on USA. USA now wants to bring jobs back to US that is the theme of reelection by Obama let's see how things workout.

 

[Galaxy]

Compare Chinese PPP to Japan or South Korea and you will see they are not even in 20% range.

Yes and China won't able to reach that level also.

China is mainly export oriented nation, 40% economy is dependent on that. Those products have limited margin and going forward, They will face more and more competition with increase in input cost. They will be in Middle-Income trap somewhere around 8,000-10,000 $ Per capita nominal until and unless China makes something like Korean LG & Samsung which looks highly unlikely.

 

[Galaxy]

70% of China's economy is dependent on USA. USA now wants to bring jobs back to US that is the theme of reelection by Obama let's see how things workout.

Yes, But It would be very difficult to match Chinese cheap price.

 

[LETHALFORCE]

Yes, But It would be very difficult to match Chinese cheap price.

True but US politicians have to address 20% unemployment in USA at some point.

 

[LETHALFORCE]

Yes and China won't able to reach that level also.

China is mainly export oriented nation, 40% economy is dependent on that. Those products have limited margin and going forward, They will face more and more competition with increase in input cost. They will be in Middle-Income trap somewhere around 8,000-10,000 $ Per capita nominal until and unless China makes something like Korean LG & Samsung which looks highly unlikely.

Chinese per capita income is around 6,000 i don't expect it to go 25-60% higher and maintain cheap exports too. If the govt owns everything there is absolutely no reason to raise wages. If you quit because you didn't get a raise you will go somewhere else and work for the same govt that still won't give you a raise in the new job.

 

[ice berg]

Yes, But It would be very difficult to match Chinese cheap price.

Nah just sell what they need.

 

[Galaxy]

True but US politicians have to address 20% unemployment in USA at some point.

Yes, They have to sooner or later.

 

[CherrywoodHunter]

duplicate post, deleted

 

[Galaxy]

Nah just sell what they need.

really ??

Top 100 international brand and there is no Chinese product. Do you why ?? Why China failed to make something like LG or SAMSUNG. China is No. 1 in Auto sector, Still nothing like Mercedes, Hyundai, Toyota, Honda.

China is successful because of cheap products. But it has it's own limit and sooner or later, you will face Middle-Income trap. It's inevitable.

 

[CherrywoodHunter]

How does a stock market decline 60% and govt claims growth of 9% annually thru the decline?? Someone is cooking the books somewhere. This does not happen in transparent economies.

2008-09 was a down year for India in terms of SENSEX. But India was claiming 7.1% GDP growth.

India 2008: 7.1% GDP growth, BENSEX 50% loss;
China 2011: 9.1% GDP growth, SSE 16% loss.