I get a strong suspicion that too many people are too overweight in Chinese stocks now. The reason for this is that after posting the China Tax and China Labour Law changes on a number of sites, there has been absolutely no response at all on most. High profile names ignore the posts, nobody commenting at all, either pro or against.

It therefore suggests to me that lots of people are presently very overweight in China stocks, they have got caught with the market weakness, and are now holding at a loss - waiting to sell any rise.

If, and its only an "if", the market weakness continues, and more and more of these people are trapped into China plays - you can foresee, imv, a lot of weakness coming into that sector, as more and more give up and bail out.

Quite remarkable that so many got duped into buying "China" as a safety against US/EU credit fears and recessions - only to now find its not as safe as they thought, and China stocks are also falling.

My own suspicions were that the China stock dream would go into breakdown and start its fall once the 2008 Summer Olympics had passed and the government can afford the luxury of upsetting lots more people and not caring about "face" during the Olympics that the world will be watching.

Is there another boom left in them before the Olympics comes and goes ? Will the boom not happen as its sold into ? Will they all meakly fade now and continue to do so ? Will they just keep on booming and not fall back again ?

Please discuss !!

Very interesting article to read in full, link below and a snippet from it, and this is written by a Chinese. :

http://seekingalpha.com/article/89641-the-great-bubble-of-china-next-to-pop

The Great Bubble of China: Next to Pop?

by: Frank Rong posted on: August 07, 2008


.........................China is well known for its corruptions. I was told by someone that in Shanghai, realtors, buyers, builders and bankers are all colluded to make big money. Banks lend to anyone who applies and to any builder who builds, as long they get piece of the pie. Banks belong to the government and corrupted bureaucrats are in charge of handing out loans

Subprime in the U.S. was a disgrace, but in China, its lending standards are much worse the subprime. Banks lend to who they know or lend to anyone for social reasons. The primary lending decision is not based on whether borrowers can repay.

I dont have the figures, but l know too many foreigners are investing in China, reminiscent of the Gold Rush in 1849. Decisions to expand manufacturing capacities in China are not based on economics, rather for social reasons. One indication of excessive capacity is this: now you can buy a 52 Hitachi (HIT) LCD TV for $1,500 in store, I dont know how the manufacturers can make any money in making that TV.

The commodity bubble is fueled by the Chinese construction bubble. Building roads, skyscrapers and expanding manufacturing plants take lots of steel and energy. But underneath every bubble, theres a pin. I think it will burst very soon. China's stock market bubble has already burst. When the real estate bubble bursts, then the whole economy might fall into a very deep recession.

When you have a true bubble, nobody sees it. We only recognize it when the bubble is over. The American housing bubble is small scale when compared to China. Everyone warned about the American housing bubble for years before it popped; therefore, I dont think it can be called a housing bubble.

China is a true bubble. No one believes that a slowdown is even possible.

Investing in China is a sure thing to many foreigners. Yet history has told us that foreigners are the dumb money and they have been very consistent: buying high and selling low...........................

http://www.nationalpost.com/opinion/story.html?id=710744

The coming Chinese slowdown

David Frum, National Post

Published: Saturday, August 09, 2008

The leaders of China have carefully planned an imposing Olympics. They have bought new stadiums, new airports, new facilities of every kind -- in fact, just about everything available to an authoritarian state with a full treasury and low labour costs.

They overlooked only one possibility: that the Olympics would arrive at the same time as China's economy braked to a stop.

To understand what is happening in China, compare two statistics. In the 12 months ending ...............

Taking this Times article :

http://business.timesonline.co.uk/tol/business/economics/article4492816.ece


From The Sunday Times August 10, 2008

The dream is over as China wakes up to global downturn

The stock markets are falling and exporters are going to the wall - Michael Sheridan in Shenzhen

IT IS RARE to see an estate agent running out of his office after a prospective client, but the young........................






When taking in with this article :

http://seekingalpha.com/article/89641-the-great-bubble-of-china-next-to-pop




Starts to lead to, as the writer said, the pin thats under the bubble. The construction boom in China has employed many people, though its corrupt ways its left banks holding far too much NPL's (Non Performing Loans) - the real NPL figures would frighten people, even the official statistics are worrying.

The building has gone on because it could even though it was not needed, because people made loads of money and at the end of the day nobody cared if the property remained empty as the "book value" could be kept high and was rising so nobody knew about all the corruption that went into it.

This has been happening for years and years now, and as I have often said if you are in China then go around at night and see just how many buildings are completely empty.

Lots of "analysts" have been imo hyping away about so many people going to migrate to cities.........but how can they.

They need a job and money to move........and with unemployment rising how are all these "rice farmers and peasants" going to be moving into these luxurious new apartments being built everywhere.... It was always a load of nonsense but in bull markets people overlook it and ride the wave.


If, as its suspected, that a property collapse is coming, it would be devastating for the Chinese economy. As the writer said a true bubble is one where people cannot see it ever stopping - and when it does, the effect is stunning.

Wonder what people in China know.......... ?????? Perhaps they are not getting ramped into the hype about their own country....... ?


http://money.cnn.com/2008/08/11/markets/china.ap/index.htm?postversion=2008081107

China shares fall to 19-month low

Benchmark Shanghai Composite Index tumbles 5.2% on economic fears.

Last Updated: August 11, 2008: 7:04 AM EDT

SHANGHAI, China (AP) -- China's benchmark Shanghai Composite Index fell 5.2% Monday following the release of economic data showing wholesale price inflation jumped to its highest level in 12 years in July.

The Shanghai index closed at 2,470.07 on Monday, down 135.65 points. That was its lowest close in more than a year and a half.

The Shenzhen Composite Index of China's smaller, second market plunged 6.6% to 698.37.

Airlines, textile exporters and refiners led the decline. Two of three major publicly traded airlines dropped by the daily maximum 10%.

The government reported Monday that the producer price index rose 10% in July over a year earlier, its highest rate of increase since 1996 and a jump over June's 8.8% rate. Such increases, fueled by rising energy and raw materials costs, add to pressure on consumer prices, complicating Beijing's effort to rein in politically sensitive inflation.

Chinese investors have become increasingly jittery over the economic outlook amid signs that the malaise afflicting the U.S. and Europe might be spreading to Asia, with corporate earnings bound to suffer. Analysts said the start of the Beijing Olympics last week had quashed any lingering hopes for a games-related rally.

"Investors still think the market is weak," said Qian Qimin, a strategist at Shenyin Wanguo Securities. "They are disappointed," he said.

So-called "B-shares," which are denominated in U.S. dollars and take up only a small segment of market volume, fell sharply in Shanghai, dropping 9% and helping to pull the composite index lower.

Stricter foreign exchange controls and a strengthening of the U.S. dollar against the Chinese yuan could be leading speculative investors to pull out investments that had been targeting gains in the local currency, said Zhang Linchang, a strategist at Guotai Junan Securities in Shanghai.

"It's hard to calculate, but it's possible that hot money is leaving China because of that," Zhang said.

In share trading, a steadying of global crude oil prices failed to buoy airlines amid concern over weakening passenger demand.

Among the airlines hitting the daily downside limit, flag carrier Air China ended at 7.82 yuan and China Eastern Airlines dropped to 6.17 yuan. China Southern Airlines dropped 9.9% to 6.09 yuan.

China Eastern Airlines announced late Sunday that a deal to sell a strategic stake to Singapore Airlines and Temasek Holdings, the investment arm of the Singaporean government, was off after they failed to meet Saturday's deadline for reaching a final agreement.

Oil refiner China Petroleum & Chemical Corp. fell 5.4% and PetroChina plunged 5.54%.

Aluminum giant Chinalco also fell by the 10% limit. Property developer China Vanke slumped 5.6%.

Chinese investors dont have a clue about investing - typical buy high sell low going on...

Most were first time investors sucked in by the market, which was clearly a bubble. Is probably overshooting to the downside now.

It also has sod all to do with AIM chinese stocks as they have never enjoyed high p/e's, in fact quite the opposite.

Strange you dont mention about inflation dropping, or exports gaining 28% etc on here isnt it???

Is PP solvent?

With US, UK, Germany, Spain, Australia and Japan all facing recession, China can only be next...

Long term investors start to buy chinese stocks.

http://uk.reuters.com/article/stocksAndSharesNews/idUKARO23549420080912?feedType=RSS&feedName=stocksAndSharesNews

PP wiping all his threads now? All those low p/e threads and stock picks (all now losing heavily) all erased. LOL

Well, now even the so called "experts" are seeing and forecasting China is in trouble. Love it.

Said to everyone back in January this year to sell everything, as stocks were going to crash and got berated by the rampers and their abusive multiple alias names.

Said China was going into recession in 2009 and will suffer badly in 2009 and 2010, and now as it looks ever more firm as an event to happen, even the big boys start to acknowledge it.

I am so glad I stopped posting on AD v FN, the abusive rampers on there will now have lost so many people so much money by egging them on to buy these awful Chinese stocks with nothing but ramping, I tried to warn people but they prefer to listen to abusive rampers and not people putting out decent, if negative, opinions of stocks and markets.

Now, I can sit back and feel sorry for anyone still in stocks, or ramped into them by the uber bullishness of other posters. In this market speculative big potentials are worth a punt, certainly Chinese aim rubbish is not, anything linked with China is surely on for a very bad 2009, their credit crunch ad recession is only just starting, and the effect there will be bigger imv.

This from an article today :

http://www.telegraph.co.uk/finance/markets/3148364/Russia-and-Brazil-crumble-as-commodity-prices-crashRussia-and-Brazil-crumble-as-commodity-prices-crash.html

"""""""""Albert Edwards, global strategist at SociGenerale, said China depends on exports to US and Europe for its lifeblood, and could face banking problems of its own.

I think China is going into recession as well. This is going to catch investors off-guard. """""""""""""


I feel sorry for most caught in this mess, but a few people deserve everything that is coming their way, and hopefully some of those burned by these people, will let them know in no uncertain terms :)

Agree with you, Papalpower. SOLA, CREO, GNG, WCC, HAIK, etc all crumbling.

hyleo, it will be a double whammy effect. First they will get hit along with all other AIM stocks are liquidity is removed and people sell their shares for much needed cash.

Then, when the UK/US are over the worst, the double whammy occurs in all likelihood, and thats the China recession and credit crisis bites, so rather than rise along with other AIM stocks, they will get sold off even more as everyone scrambles out of the mess coming their way in 2009/2010.

I hope that people sold off all these Chinese stocks and have no risk weighting in them.

The headline should be "Get out of anything Chinese, before that all goes bang too"...........remember, they said UK housing would never go down...........the same idiots say China is bulletproof.................

Some reports on the issues :

http://images.businessweek.com/ss/08/10/1002_china_economy/7.htm

As I have said for years, NPL's are the problem in China, a slowdown would lead to meltdown worse than the US.

*******************

http://www.boston.com/news/world/asia/articles/2008/10/03/economic_tribulations_reverberate_in_china/

Insulated, or going to suffer badly ?

********************

http://www.bloggingstocks.com/2008/10/06/what-does-a-recession-in-china-look-like/print/

And do not forget, China needs around 8% GDP growth in order to create jobs for the ever increasing amount of school leavers.


************

And many many more............

Won't be long before PP is a buyer here.

Sadly, China is the only economic superpower left with the money to bail out the U.S. When they go into recession, the U.S. and probably the rest of us will go into a depression...

In my opinion.

Strawbs

China has no money, thats all talk and paper, what it does have is lots and lots of debt, its been run on a hyper version of the USA problems and so it will have bigger problems that the US is going through. All to come for China.

When China goes into recession, the US will be coming out of it.

Major problems ahead for anything related to China, IMO.

Anything China related must be a wonderful short for now and next year, there must be a good few percentage points still to drop, as their cash gets burned away.

That's my worry Papal. As I posted elsewhere. Governments around the world are making huge promises of bailouts.....but who's going to finance it! When China and Asia goes, we all go.... down the pan for a decade or two probably....

In my opinion

Strawbs.

China has underwritten all the US junk, thats why every man and his dog has been pumping China, the need to bump up the other side of the scales and make a balance.

Now that the US has collapsed it no longer matters, what matters is sorting the US out, before everyone gets to know the problem in China is perhaps twice as bad as the one playing out in the US presently.

Its all good, as China will probably collapse as a Communist country, and the turmoil will allow US and European companies to take the lead back and create jobs and wealth back in the western world.

The trouble is with China is that everything is controlled by the "official bureaus of statistics".

The West has learnt from Communism that sometimes its best to lie, and then correct with revisions later. So aptly done by the USA of late who say they are not in recession, only to revise figures 6 months later and so "well oh we were then but not now" kind of stuff.

China's economy has been booming along, probably in the realms of 20% GDP growth, but because those old Commies plead poverty to the rest of the world, and want exemption from WTO rules etc... they have consistently under reported their growth. You cannot plead poverty when your economy is growing at 20%.

While they said it was 8% it was probably 16%.

While they said it was 9% it was probably 18%.

They do this as it allows a "soft landing", now in decline (and unemployment is rising so forget their fairy tale) they can say its now slowed to 8%, when in fact now its likely 4%.........so they under report when its going up, and then over report when its going down.

This allows everyone to "see" a nice balanced set of figures", nothing to frighten anyone as they are averaging....................BUT.............they are now in the more serious stage of over reporting, while those in the know know that things are not good, they will spout to the world that the slow down is slight and still growing strong, but actually.........well.........its a very different story.

China is holding all the US junk, its now over reporting growth as it slides into recession, and social unrest is a major factor.

Worrying times ahead for anyone exposed to China.

Whilst the companies will still have to report their 2nd half 2008, still "bumper", everyone knows in reality that their 1st half 2009 figures will be awful.

Many people will be trying to hype up Chinese stocks on their still to be reported 2nd half 2008 figures early in 2009, but beware the 2009 figures coming later next year.

2009 and 2010, going to be some very sticky and nasty years for China in particular IMV.

Interesting read PP-thanks. Certainly not seen this angle mentioned in financial press. Plenty about Japanese companies being good value with stronger balance sheets and in position to export to China.