China's "weird" stock market

[Ian_Lee]

Speaking of "A" and "B" shares, do fellow poster find it extremely weird that albeit sustaining a 7.8%+ economic growth rate for the last decade, China's stock market -- the indexes of Shanghai and Shenzhen Bourses -- were at a 4-year low?

In fact, all those private enterprises have given up to IPO in the stagnating and struggling Mainland bourses and move to HK bourse for listing.

Hong Kong stock market is now the third largest market in terms of amount of IPO in the world (after US and Spain). And about 70% of them which raised capital there in last year were those private enterprises based in Mainland.

It seems Shanghai still has a long way to attain the status of financial capital of the Orient.

[Ian_Lee]

The transaction tax is just lowered from 0.2% to 0.1%. Will it help?

[Green Pea]

I don't find it weird. It's probably predicting a massive economic bust. Markets are good at that. You can't have rapid growth, a pegged currency, and no inflation. Something has to give. Other factors?

1. The market is not open to foreigners. Major mistake.

2. Chinese companies are not transparent.

3. Other basic mechanisms, such as short-selling, options, and bond markets are not developed.

Until Shanghai changes these, Hong Kong will be the market.

[ysaritoh]

What Green Pea Said It's true..

I, personally, don't find this thing weird.

btw, I found good site, hopefully it helps:

http://www.site-by-site.com/asia/china/astock.htm

[website]

Man, China is a mess. This article gives a good overview of the Chinese stock market:

http://www.economist.com/finance/displayStory.cfm?story_id=3698376

Basically, the Chinese stock market is a sham. Most of the companies listed are not true private companies, but actually poorly-run state-owned companies that sell their stock at high prices because Chinese people have a poor understanding of stocks. Average Chinese investors bought shares at high prices 10 years ago without realizing the prices would fall later when the state companies unloaded their remaining stocks. Investors also have no good places to put their money since banks are risky due to too many bad loans and pay very low interest-rates. Real estate is also risky because the property market is overbuilt. Mutual funds and IPO's were only just permitted. Most brokers are insolvent because they guaranteed high returns. Corruption is common, too. Foreigners are/were denied to invest in Chinese businesses. Smart Chinese companies avoid the whole

house of cards by listing on foreign stock exchanges. China is moving in the right direction, but in almost every area they are backwards compared to developed countries. It's easy to see why China has been controlled by so many countries despite it's size.

http://www.your-nation.com

[Ian_Lee]

I think the principal problem about China's stock market is the perception problem.

When Deng let the stock market start in 1980, he had said that it was an experiment and would "close" it if it didn't work (sounds very scary).

And since then, the government liked to "manipulate" the market by administrative measures.

It never allows the market force to run its own course.

Anyway, the less successful the stock markets of Shanghai and Shenzhen are, the more reliance Mainland economy places on HK's stock market for IPOs.

[Jack MacKelly]

Stability is important, it helped the companies linked to NASDAQ move so good, today the German DAX and Paris CAC depends much on the Euro rates and Euro zone banking, Hong Kong stocks have been doing quiet well the investments in S.Korea and HK's Hang Seng do much better than investments inside the economic stagnation of Japan. Smaller European nations are starting to grow quickly, hopefully the USA can do something about its rising debts and the Russian market is starting to open up a little, Mainland China could still be a big risk.