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The Chinese economy - be afraid

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The Chinese economy - be afraid

Postby JR8 » Tue, 09 Dec 2014 4:58 pm

Two snippets of news from a 'daily round-up' e-mail ex the Daily Telegraph (London).

- 'CHINA'S STOCK MARKET DETACHES FROM REALITY
All the news coming out of China is gloomy, but the country's equities are on the rise, up by a third in the last six weeks as the government eases policy to avoid a housing crash.
The country's retail shareholders are looking for somewhere to put their money, but Beijing is now worrying that it has talked up "cheap stocks".

- [From the 'Quote of the day' column]
'Turnover, leverage and account openings have all soared and there is a sense of mania taking hold'

Mark Williams, from Capital Economics, on China's stock market surge that has seen many families take out brokerage loans to buy stocks, increasing leverage and risk. Margin debt has risen to more than $130bn from nothing three years ago'.


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Re: The Chinese economy - be afraid

Postby Wd40 » Tue, 09 Dec 2014 6:01 pm

Shanghai composite fell 5% today! Maybe signs of things to come

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Re: The Chinese economy - be afraid

Postby JR8 » Tue, 09 Dec 2014 6:16 pm

Wd40 wrote:Shanghai composite fell 5% today! Maybe signs of things to come


The only 'major' market that I can see that is not down today is Singapore!

So there's a sense Shanghai today might just me mirroring the majority of others. Nothing fundamental would seem to have changed in their underlying issues.
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Re: The Chinese economy - be afraid

Postby Wd40 » Tue, 09 Dec 2014 6:36 pm

Shanghai went from 2000 levels to almost 3000 in the last 6 months, it's giving back some of those gains. Singapore is stuck in that 3200-3400 range from like 2 yrs I think.

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Re: The Chinese economy - be afraid

Postby Wd40 » Sat, 13 Dec 2014 9:54 am

Whoa! world markets are falling again! look at Europe 2.5% down and that is with not going up at all. Europe is totally screwed I would say, no hope.

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Re: The Chinese economy - be afraid

Postby sundaymorningstaple » Sat, 13 Dec 2014 10:52 am

Seems like I heard that three years ago as well......

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Re: The Chinese economy - be afraid

Postby JR8 » Sat, 13 Dec 2014 12:40 pm

Wd40 > Whoa! world markets are falling again! look at Europe 2.5% down and that is with not going up at all. Europe is totally screwed I would say, no hope.

Yes I know, each time 'I get into my Jaguar to drive down to a local HSBC to draw money (printed by De La Rue), to visit my Singaporean but British-qualified GP* and pay for any Glaxo/Astra-Zeneca medication he prescribes, I too reflect upon how hopeless the future of the UK/EU is. Still a good shot of whisky bought from M+S downtown usually sweeps those clouds away. Hehe...

More seriously this week you have something of a perfect storm of political inaction, and rabbit-in-headlight cartel-ism.
I.e. In the late 1920s the fall-out from WW1 rather came home to roost for the Germans. Hyperinflation followed, complete with 10 million Reischmark notes being trundled around by the wheelbarrow load by desperate citizens. They were (arguably) trying to print money to pave a way out of depression, but one side-effect of the chaos that ensued was the rise of the Nazi Party, Hitler, and perversely WW2. Having finally learned from that, in the same way that an ex-alcoholic has learned that 'having just one drink' is never going to be an option again, the Germans now have a deeply embedded iron-clad economic rule: They will 'NEVER print money again'.

Wind forward to today and 'Jetzt haben wir ein problem' [Now we have a problem]. Rather than militarily invade Europe, they have sated their instinctive need to take over and control everything by simply appointing themselves to run Europe politically and economically instead (bayoneting enemy regiments of 15 year olds to death is so last century).

And there we have the problem. Europe is potentially very dynamic, but the economy is controlled by the equivalent of an 90 year spinster who remains so terrified of spending ('Quantitative easing' etc) and where that leads to, that she can only sit on her hands and navel-gaze. On and on it will go with not a glimmer of possibility, hope, inspiration, or action in sight. That there is nil plan is what is killing the EU stockmarkets. It's as clear as day that the EU needs to print money, but the spinster in charge cannot accept taking even the shortest-term overdraft ... "It's the first step on the road to doom I tell you: Austerity is the answer!".

But the Greeks for one are not going to take austerity imposed by the Berlin jackboot (Greece was occupied by Germany during WW2, and memories are long)... so there's no quick solution to Greece and the rest of the periphery (aka PIIGS). And that same contradiction is what lies at the very heart of the EU itself. For the EU to work as originally planned, all the EUs national debts must be pooled... but there is not a hope in hell that the German electorate 'having come this far' (or any other of the wealthier EU countries) is going to vote for that final step. And that, is why the EU as it is is doomed to fail.

---
OPEC. Cartel. Dominated by Saudi Arabia. The head of their delegation were probably appointed because, 'despite being a sometime playboy fool, who has never needed to do anything as demeaning as have a job, he went to school with the King, got a job working for him, and will do his bidding for him now. Add to the mix that Saudi is rich enough it can ride out low oil prices for a long time... meanwhile all the smaller producers (or countries where profits made are marginal vs cost of extraction) are being seriously squeezed. Saudi know this, and indeed are doing this superficially 'irrational thing' [i.e. not cutting production] for political reasons, to squeeze someone else. But that is a whole other kettle of fish...

Shanghai went from 2000 levels to almost 3000 in the last 6 months, it's giving back some of those gains. Singapore is stuck in that 3200-3400 range from like 2 yrs I think.

50% in six months, hmmm. That's because Beijing are doing what Berlin won't, printing money. But Beijing are doing it in an almost limitless way to keep all the economic plates spinning. Because when they stop it might become akin to 1920s Germany, a future powder-keg in the making, and they are terrified of any prospect of that. Heavens knows what the future holds for the Chinese economy but right now they appear to be on a one-street to doom, with no exits.

As for SG. I don't follow the SGn market, but I note that the currency value is micro-managed on a daily basis. Given the extent to which 'Raffles Place has been brought to Yishun Avenue 28B' [that's the local equivalent of 'Taking Wall Street to Main Street' ... hehehe] a local stock-market rout might have deep social implications. Granny Chan and a million others will yell: 'You made me invest in CPF, now you lose my pension!!!'

Amongst all these 'managed markets' and cartels, the insiders know and control the limits for where their markets can go. It reminds me of 'insider trading', just on an industrial scale.


* By coincidence my dentist is too. As was the ENT specialist I visited a couple of weeks back.
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Re: The Chinese economy - be afraid

Postby Wd40 » Sat, 13 Dec 2014 10:56 pm

Thanks JR8. Interesting thoughts. 2015 looks like is going to be a tough year for investing. With EU, China and Japan in trouble and now with oil prices crashing, I doubt the US markets can continue chugging along. I think US will not be able to raise rates at all. Cheap money is here to stay.

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Re: The Chinese economy - be afraid

Postby Aragorn2000 » Sun, 14 Dec 2014 12:11 am

So the world is heading for a financial doomsday. What can we do to prep for that, to preserve our little hard earned money? I'm thinking of buying gold but gold can be confiscated by the gov at that very moment when we need it most.

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Re: The Chinese economy - be afraid

Postby JR8 » Sun, 14 Dec 2014 12:27 pm

Wd40 wrote:Thanks JR8. Interesting thoughts. 2015 looks like is going to be a tough year for investing. With EU, China and Japan in trouble and now with oil prices crashing, I doubt the US markets can continue chugging along. I think US will not be able to raise rates at all. Cheap money is here to stay.


It doesn't seem like a simple situation does it. A lot of people have got used to 'cheap money', for what, 10+ years now? When rates start rising there is going to be a lot of pain, so you'd expect the central banks to start the cycle early and do it in small comfortable steps. Better to catch it early than having to try and play catch-up and end up raising rates yet higher.

How the politicians must be sweating about the global economy picking up, and them individually being branded 'the bastard who made me lose my home'.
'Do it or do not do it: You will regret both' - Kierkegaard


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