Whats wrong with the Chinese Market? Somethings fishy.

[trackwhack]

Despite China posting the highest growth since the financial crisis, its still been the worst performer among major markets.

World markets peaked in Sep/Oct 2007. Then came the crisis when all markets tanked together. But they have recovered, somewhat. Except China. The Shanghai Index all time high is above 6000. Its trading today at sub 2200. Comparatively, Dow Jones peaked during the same time at 14K its trading today at above 11.5K. The FTSE peaked at 6700, again during the same period of Sep 2007, its trading today at 5050 levels. The Dax was at 7900, trading today at 7400. The Sensex was at 21K, trading today close to 16K.

The markets dont lie. CCP cannot mask the market. So whats really tying down the SSE Comp? Can some of the learned Chinese here give us your views. (Nimo Cn and Ice berg, kindly excuse). I'm asking for an honest opinion and not propaganda. Many of us have money parked in the markets. I have a very uneasy feeling about the weakness in the Chinese markets.

 

[Ray]

(Nimo Cn and Ice berg, kindly excuse)

Actually, only Kickok and Ohimalaya would qualify for not getting things meshed in propaganda and obfuscation.

 

[mylegend]

For my opinion, it is the corruption of the SEC-like department of Chinese government. A company I know have tried to become public from 4 years ago. We well qualify for the 3 years 30% annually net income growth criteria, and we pass the 20 million RMB net income requirement too. However, after three year, when our profit goes well above 60 million rmb net income, we are still under process. The reason was simple, 证监局（china securities regulatory commission) is one of most corrupted department of government. For the process to be done, you need a 保荐人(sponsor) to submit your material to china securities regulatory commission after your material is being reviewed by provincial securities regulatory commission. There is only about 1876 of them up to September 2011. Three years ago, four years ago was less than 1000 of them. The sponsor from 券商，ask for 30 million rmb personal favorite to submit the material. My father refuse his request and changed to another 券商. Same exact theme happen again, only this time sponsor ask for 20 million rmb. My father refuse again, and changed to another 券商. Guess what, sponsor no longer request the cash, but just halt the entire submiting thing for no apparent reason. I guess he want us to be active to provide him cash. After some luxury Swiss watches failed, we changed to another 券商, but we learn to put clause on the agreement to set a deadline. However, the leadership of china securities regulatory commission changed overnight. We are still dealing with the issue, but should get it done by this summer to finish the listing.

So quality of the listing company is a issue some time, many company got listed due to immense kickback they pay to the official.

There is some other fundamental problems too, but this is what get me angry.

 

[mylegend]

Another issue is the listing of Gigantic state own bank and resource company, their immense asset and profit put their value at top of world level, for example, China Industrial Commercial Bank is the biggest bank in the world according to market value. China is country where much of resource and capital is concentrated on the State-own business, so the market does not have enough capital to absorb those giant. Those giant account for much of Chinese stock market value...

 

[Ray]

Quite complicated indeed!

Corruption is something that sadly ruins everything in every country.

I hope that soon you will be able to achieve what you and your family set out to do!

Maybe that is why the rich Chinese are said to be leaving.

 

[SpArK]

Hang seng is -0.30% today.

Sensex is flat on 10 points positive..

 

[mylegend]

The listing of giant state own firm is huge problem in my opinion, the value of listing of one giant state own firm can provide as much capital for hundreds of small-medium size private business.

 

[Galaxy]

Strong Fundamental does not move market upward in 2-3 years. Chinese market was expensive few years back so not consolidating with negative bias.

Even Sensex is at same level of 2007 even after 4.5 years of GDP growth 8% on average. GDP size increased by 70% in that period but Sensex price remained same. But in Jan,08 (4 years back). Our market was very expensive. (Mcap was 160% of GDP)

In long run, Both China and Indian market will perform well. Not to forget, China market performed very well for almost a decade. This is ongoing consolidation phase for Shanghai/HK. Currently It's undervalued and Valuation will become expensive at next bull run top by end or sometime in mid of this decade.

 

[mylegend]

Also many great small-medium private company refuse to list in the stock market, because it require three transparency of all account. Many private company pay only 1/10 or even less than what they suppose to pay in term of taxes. There was two solution to solve it. Wait for three years period, and paid taxes honestly for three years. Another solution will be tell the government you cheated and pay the fine, and continue with your process.

However, after the introduction of 创业板（Growth Enterprise Market）（requiring only one years of data)，some private company decide to go with this route.

My guess is Chinese government also seriously underrate the actual GDP size of China.

 

[mylegend]

Strong Fundamental does not move market upward in 2-3 years. Chinese market was expensive few years back so not consolidating with negative bias.

Even Sensex is at same level of 2007 even after 4.5 years of GDP growth 8% on average. GDP size increased by 70% in that period but Sensex price remained same. But in Jan,08 (4 years back). Our market was very expensive. (Mcap was 160% of GDP)

In long run, Both China and Indian market will perform well. Not to forget, China market performed very well for almost a decade. This is ongoing consolidation phase for Shanghai/HK. Currently It's undervalued and Valuation will become expensive at next bull run top by end or sometime in mid of this decade.

Yes, Chinese market was once at 6000s level in 2007, almost three time of current situation.

 

[mylegend]

In some respect, Chinese stock market is well-regulated. Major stock holder are forbidden to sell his/her stock for three years after IPO.

Chinese government also discourage speculation by setting up rule that forbid trader from selling and buying a stock on the same day, so if you buy a stock today, you can only sell it tomorrow. This technically prevent day trading.

 

[Galaxy]

When Economic reform started in China in early 90's, Then at that time Hang Seng Index was around 2,000 and Today 18,000. (9 times up 2 decades). GDP grew 9 times in same period. Is this co-incident ? No, In long run, Market index, Stock prices moves as per fundamental valuation and earnings. But in 2-3 years, Most of the time, It's either Over-valued or Under-valued and price fluctuates as per various economic factors/earnings/policies. 4 years back, It was over-valued but today it's under-valued on multi-year basis.

It was good move, By letting the Yuan appreciate due to pressure on exports. Inflation has also been controlled well by demand & supply led measures as well as administrative dictates (Not possible in India).

Two Challenges in future for corporates in China 1>High Input cost/wages 2> Strong up move in Yuan. Overall, In long run China market along with Indian market will outperform in Emerging market.

 

[Armand2REP]

Something seriously wrong in China, retail shops disappearing overnight.

 

[trackwhack]

Galaxy, we are talking about the Shanghai Composite not the Hang Seng. The Hang Seng is a mature market and way more transparent and synched with other global markets. Also read my first post and the questions I've asked. The general Udhayan Mukherjee gyan, anyone on this forum can give.

 

[Galaxy]

Galaxy, we are talking about the Shanghai Composite not the Hang Seng. The Hang Seng is a mature market and way more transparent and synched with other global markets. Also read my first post and the questions I've asked. The general Udhayan Mukherjee gyan, anyone on this forum can give.

Shanghai and Hang seng moves in same way. Most of the companies are common on both index. like NSE and BSE.

Unfortunately, Anyone can't give Gyan. People mostly spend time in pin-point faults with negative bias. Analyse with open mind and people will realise that nothing wrong in Chinese stock market. It's just working on market dynamics.

I have already replied, Chinese market was over-valued so it corrected. It's not going up because of few economy reason. In long run, It will perform very well. Since, Chinese market is highly regulated and controlled by CPC, So FII's are always sceptical to invest until they are sure of positive future ahead.

 

[mylegend]

Two Challenges in future for corporates in China 1>High Input cost/wages 2> Strong up move in Yuan. Overall, In long run China market along with Indian market will outperform in Emerging market.

I agree. Wage have indeed more than doubled in recent years, my family company adjust to currency issue by focusing on domestic market.

The wage were never higher than 2000 few years back, but now they are close to 3000 in Guangdong. Also, since my family's business set to become public and we can not hide away from most of regulation. For instance, we were require to pay 2/3 of all 社保(social security) for every single workers(include all factory workers). The 2/3 of 社保 is about 300 rmb， workers also need to pay for 1/3 that is 150. However, because the Chinese social security system is provincial or municipal base, so labor from other province refuse to pay, because they know they will be bond to the Guangdong province if they still want to get their shares of medical benefit and retirement benefit. After all, we decide to pay for full shares 1/1 of 社保 for all workers to settle the issue.

Chinese government proudly claiming they are close to the goal 100% social security and medical insurance coverage（currently they reach 90% level) for all chinese. But sadly, the government pays nothing to the system, it the private companies and workers that bears the cost.
Below links are information about 90% medical coverage.
http://china.huanqiu.com/roll/2011-10/2078148.html
http://news.qq.com/a/20111013/000266.htm

 

[trackwhack]

Shanghai and Hang seng moves in same way. Most of the companies are common on both index. like NSE and BSE.

Unfortunately, Anyone can't give Gyan. People mostly spend time in pin-point faults with negative bias. Analyse with open mind and people will realise that nothing wrong in Chinese stock market. It's just working on market dynamics.

I have already replied, Chinese market was over-valued so it corrected. It's not going up because of few economy reason. In long run, It will perform very well. Since, Chinese market is highly regulated and controlled by CPC, So FII's are always sceptical to invest until they are sure of positive future ahead.

Appreciate your inputs. Most markets move in similar patterns, its the extent I am trying to debate. Here is the Shanghai Composite compared to the Hang Seng in the same period.

All other market are between 10 and 20% off their peaks. The SSE composite is 60% of its peak value. Understand what I am trying to ask.

 

[mylegend]

Something seriously wrong in China, retail shops disappearing overnight.

This is not retail property, it is commercial property for office. There is cloths because it seems like it was occupy by fashion or textile companies(my family's business is in the industry, that why I know).

Some company have multiple brands, some factories with designing capability have multiple display rooms to fit different client needs. so that why they have more than one display room... One or a few company can do the effect you just seen on the video.

 

[Galaxy]

mylegend

Yes, High Input cost which is mainly contributed by wages has increasingly challenging environment and pressure on profitability of hinese corporates. Huge surplus of Current Account & Fiscal are vastly undervalued by the markets IMO.

 

[Galaxy]

Appreciate your inputs. Most markets move in similar patterns, its the extent I am trying to debate. Here is the Shanghai Composite compared to the Hang Seng in the same period.

All other market are between 10 and 20% off their peaks. The SSE composite is 60% of its peak value. Understand what I am trying to ask.

All markets doesn't move in same way. It moves as per own fundamental and valuation. Also, All companies are not common between 2 markets. Index is not exactly same, So differences !!


Chinese market didn't performed well in last 3 years due to 3 mainly reason 1> Expensive market 2> High Dependency on exports which was becoming not so profitable due to high input cost 3> FIIs were hesitated to invest due to lack of transparency backed with control by CPC.