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 !!

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.

GNG announced today a defacto downgrade going forward. Their trading update remains in line, but the outlook is not so good now, and they admit that China is slowing down, this is what you will see, as it becomes apparent over all the hype that in fact recession is coming the way of China.

Chinese stocks certainly should be excellent shorting candidates for 2009 and 2010.

ADFN is really awful now IMO, it seems to be full of Chinese stock rampers, who all appear to have ramped themselves into buying lots of Chinese AIM stocks, and now they are trapped into them in a bear market and with China looking very very dodgy for 2009 and 2010, they are getting awful in their ramping and abusiveness.

I do not post on ADFN now, as said before, as its gone very downhill IMO, the majority of the posts are from what appear to be ramping crews,and they are so hard in trying to ramp Chinese stocks it makes you sick at times.

On top of the GNG admission that things are slowing down, today also saw ZTC (Chinese telecoms) say this which again is more evidence to say that things in China are under pressure, and those who said 2009 would be a bad year for anything China related, might well be proven correct :

"As has been widely reported, trading and credit conditions for SME's in the PRC have become increasingly difficult throughout the third quarter of 2008. This is due to deteriorating macro economic conditions outside the PRC and slowing economic growth and restrictive credit policies in China. As a consequence, our markets have become increasingly competitive, disruptive and oversupplied. ZTC has therefore achieved sales significantly below those seen in the same period last year.

As a consequence, the Company's working capital available to operate and expand its business has become constrained, as has been previously announced. The Company continues to review all aspects of its operations to reduce costs and improve efficiencies to improve the availability of working capital for new model and market development. The possible sale of assets referred to above is one example of a potential method of cash generation that is being actively considered."

Well worth a read for anyone with an opinion on or interest in, China :


http://research.standardchartered.com/researchdocuments/Pages/ResearchArticle.aspx?&R=56005


Well written and researched, and I would not argue against the opinions, in fact we are already seeing the Chinese governments knee jerk reactions to the troubles being reported by Chinese companies.

The China bubble wobbles some more - wait until it bursts.................

WHEN WILL IT BURSTS, LOOKS GOOD TO ME.

BANG POP OR A BURST

Just think, this is only the start - if it falls - the fall will be massive..........that must frighten the China bulls, who are already losing their shirts.

THE WORLD IS GOING DOWN THE DRAIN,ALL OF IT.

http://news.idg.no/cw/art.cfm?id=241B925E-17A4-0F78-315F6C837378FD5F

Skrevet av Steven Schwankert

22.10.2008 kl 10:14 | IDG News Service

Dell bullish on Asia but cautions on rising costs in China

CEO and Chairman Michael Dell expressed .....................................

The following broker's report was posted by the team at FT Alphaville. If true, growth prospects in China are very much less than are assumed in most people's global economic forecasting models:


"Our resources analysts have recently been touring China and have been talking to a wide range of companies, consultants, users etc. They have returned with a very bleak picture of the Chinese economy, even gloomier than the bearish picture being painted at the moment in the market. The picture can be extended to other sectors of the Chinese economy and will have a regional impact, especially on Australia resource companies. Highlights are:

1. There is a very surprising negative rate of change in the economy being openly vocalised by corporates and other market participants. A significant number of factories are shutting down. These are shutting down due to a collapse in overseas demand as global consumers scale back spending.

2. Trade flow is locking up rapidly - letters of credit and 90-day commercial paper are no longer being accepted or transacted. Companies are resorting to 30 and 60 day paper putting further pressure on working capital. Letters of credit not being honoured beyond 3m will be a key hurdle for foreign traders who have 1-year contracts. Liquidity pressures are being seen in 60-day paper and this is expected to seize up soon.

3. There is a significant collapse in demand with end products not being able to be sold - domestic coastal coal shipments for example have declined by 30% in the past 3 months.

4. All copper smelters are losing money at current prices but demand from power companies remains stable for now. Further closures are expected at zinc smelters, with 85% of smelters thinking prices will continue to fall. A senior advisor to CISA has just said that the steel industry faces a costs crisis as material costs exceed falling prices.

5. The property market has significantly slowed, and companies are now pinning hopes on infrastructure projects. Property prices are down at least 20% in the past few weeks, with 30-40% falls in some areas. Demand for cement, aluminuim, copper, zinc, steel, iron ore and coal have already weakened.

6. For some companies, preservation of capital will be key. Our analysts believe that there are significant risks of survival in the commodities sector.

7. Consensus amongst Chinese corporates is that they are banking on a recovery in 2H09, but in the meantime they expect a significant contraction for the remainder of this year and the first half of next year. The single biggest risk they see is an extended OECD recession post 1H09 and incremental changes to China policies.

There are great hopes being pinned on the Chinese Government to help the economy. Preservation of capital is likely to be crucial over the next
18-24 months - we expect significantly more difficult conditions ahead.

Things are bad and rapidly getting worse - there is no sign that this market is about to form a base any time soon."

SOURCE: http://ftalphaville.ft.com/blog/2008/10/27/17470/markets-live/

Output cuts spark fears over China economy

By Geoff Dyer in Beijing

Published: October 29 2008 19:04 | Last updated: October 29 2008 19:04

Signs are growing that Chinas economy could be cooling quicker than expected, with a string of big industrial companies announcing production cuts over the past week.

The cuts have come as anecdotal evidence from other companies suggests a surprising weakening of demand in October amid the global financial crisis and a local housing market slowdown.

Aluminium Corporation of China, the countrys biggest producer, said last week it would cut production by 18 per cent and a senior executive was quoted in local media on Monday saying further cutbacks were possible.

Jinchuan, Chinas biggest nickel producer, said on Tuesday it was cutting its production target for this year by 17 per cent, while several copper smelters have made large cutbacks over the past two weeks.

Metals and mining companies around the world have had to rethink production in recent months because of falling prices and weakening global demand. However, companies in China have also faced reduced orders from construction companies as house prices have dropped.

Analysts from Macquarie Securities said that in Tangshan, a big steel-making centre in north China, most mills were running at 30-50 per cent of normal capacity and many small iron ore mines had ceased production.

Orders for cars and home appliances have already begun to shrink, Xu Lejiang, chairman of Baosteel, Chinas biggest steelmaker, said last week.

Zhou Xizeng, analyst with Citic Securities, said steelmakers were trying to adjust rapidly to uncertainty about demand and an inventory build-up. The recent drop in production is a sort of psychological panic, he said.

Executives in a number of other industries also said demand had been unusually weak in recent weeks.

But some executives said the slowdown could also reflect shorter-term factors such as customers reducing their inventories because of global uncertainties.

We had been expecting this to pick up a bit after the end of Olympics restrictions on factories, but things have been very quiet, said the chief executive of the China operations of a large paints company. We are trying to work out how much is due to weak demand and how much to destocking.

Economists are predicting growth next year of 8-9 per cent, down from nearly 12 per cent in 2007. Several have downgraded their numbers in recent weeks and more cuts are expected.

In September and October, there has been an acceleration in the slowdown in consumption and in exports that has not yet showed up in the official data, said Stephen Green, economist at Standard Chartered in Shanghai.

Despite fears of a sharp slowdown, a number of companies remain upbeat about growth prospects in China. I do not see this as the start of a significant decline, said Nick Reilly, president of General Motors Asia.

Paul French, a retail industry consultant in Shanghai, said the holiday week in early October had been strong for retailers. For now, things seem to be all right for retailers but when the market does slow, it does so very quickly, he said.

Local sentiment may be boosted by the central banks willingness to trim interest rates repeatedly, as demonstrated by Wednesday's move to cut the benchmark one-year deposit rate from 3.87 per cent to 3.60.

Additional reporting by Patti Waldmeir in Shanghai and Mure Dickie in Beijing

http://www.ft.com/cms/s/0/35e79c6c-a5eb-11dd-9d26-000077b07658.html

Worth a read for background China info/opinon going forward :

http://www.investegate.co.uk/invarticle.aspx?id=58707

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