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Reply #37: What’s Behind the Euphoria in Shanghai Red-Chips? [View All]

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Ghost Dog Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-25-07 10:14 AM
Response to Reply #33
37. What’s Behind the Euphoria in Shanghai Red-Chips?


And what happens in Shanghai is of great interest to global commodity and stock market operators, because China is the locomotive of global economic growth, and its staggering factory output is matched by its demand for industrial commodities. China’s share of global demand growth for commodities between 2002 and 2005 was: 51% for copper, 48% for aluminum, 87% for nickel, 54% for steel, 86% for tin, 113% for zinc, and 30% for crude oil.


At current growth rates, China’s economy would surpass the US in 25-years. But Chinese leaders worry that stiff US tariffs on Chinese imports could derail the world’s fastest growing economy, and burst the Shanghai stock market bubble. When push comes to shove with “veto proof” trade legislation in the second half of this year, Beijing would probably relent and allow the yuan to climb higher at a faster rate.

But until the political posturing turns into action, the Shanghai bubble could try to match the last great Asian stock market bubble – the Nikkei-225 of 1986-89. Chinese retail investors opened more than one million new trading accounts during the third week of April, bringing the total for the first four months of 2007 to more than 10 million. This figure is greater than that of the previous four years combined, even as signs of a bubble are getting clearer by the day. The Shanghai stock index has risen 50% so far this year, after tacking on a 130% gain in 2006.

Chinese broker, Citic Securities, has tripled in value since early November, and is a good barometer of speculative sentiment in China. Citic Securities, Shanghai’s first listed broker, said its net profit in the first quarter of 2007 rose more than 12 times from the same period a year earlier. Revenue for the three months ended March 31st, was close to that for all of 2006.

Speculative fever is running very high in China, and it’s not wise to stand in the way of an Asian stampede. The Shanghai Securities News said the number of new brokerage accounts established in a single day hit a record 282,000 on April 19th, the day of the market’s 7.2% plunge, bringing total accounts to over 90 million. This is a strong signal that market setbacks are not scaring Chinese traders away.

And another PBoC interest rate hike might not scare speculators, because it would only adjust real interest rates from being sharply negative. Traders do not expect a sudden jump by the Chinese yuan, and believe authorities will hold appreciation for the rest of the year to around 3% to avoid hurting China’s export sector.

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  -STOCK MARKET WATCH, Wednesday April 25 ozymandius  Apr-25-07 06:41 AM   #0 
  - Today's Market WrapUp  ozymandius   Apr-25-07 06:47 AM   #1 
  - Folks really owe it to themselves to read this in its entirety.  ozymandius   Apr-25-07 01:37 PM   #62 
  - Today's Reports  ozymandius   Apr-25-07 06:50 AM   #2 
  - durable goods report - must be buying lots of airplanes! Wheee!  UpInArms   Apr-25-07 07:32 AM   #9 
  - Durable goods orders up, investment strong  54anickel   Apr-25-07 09:06 AM   #19 
  - March New Home Sales DOWN 23.5%  UpInArms   Apr-25-07 09:09 AM   #20 
  - Maybe we should all start producing airplanes.  ozymandius   Apr-25-07 01:39 PM   #63 
  - Crude Inventories  UpInArms   Apr-25-07 09:38 AM   #27 
  - Oil prices rally on inventory report  ozymandius   Apr-25-07 02:07 PM   #66 
  - Up by  AnneD   Apr-25-07 04:05 PM   #75 
  - Fed's Beige Book - Everything is stable except energy and raw goods  UpInArms   Apr-25-07 02:34 PM   #69 
  - Oil prices inch up in Asian trading  ozymandius   Apr-25-07 06:52 AM   #3 
  - Egypt targets 800,000 bpd oil output in 2008  ozymandius   Apr-25-07 06:55 AM   #4 
  - dollar watch  UpInArms   Apr-25-07 07:15 AM   #5 
  - viz:  Ghost Dog   Apr-25-07 07:45 AM   #13 
  - Dollar collapse? Nuttin' to worry bout - It's how the system works!!!  54anickel   Apr-25-07 08:33 AM   #16 
  - US dollar jitters refuse to go away  54anickel   Apr-25-07 09:02 AM   #18 
  - This last sentence....  loudsue   Apr-25-07 02:37 PM   #70 
  - What do you think that SCOTUS ruling ...  AnneD   Apr-25-07 04:03 PM   #74 
     - Good point!  loudsue   Apr-25-07 05:55 PM   #77 
  - Why did the dollar remain as the reserve currency after 1971?  roamer65   Apr-25-07 04:03 PM   #73 
  - Dollar Matches Record Low as New Home Sales Trail Forecast  Ghost Dog   Apr-25-07 09:42 AM   #29 
  - C$ At New 7-Mo Highs In Favorable Environment  Ghost Dog   Apr-25-07 09:47 AM   #30 
  - Hey UIA, check out this site I just stumbled across  54anickel   Apr-25-07 10:32 AM   #39 
     - HOT dog.....  AnneD   Apr-25-07 11:02 AM   #47 
     - This image has quite a bit to say.  ozymandius   Apr-25-07 01:46 PM   #64 
     - thanks, ozy!  UpInArms   Apr-25-07 06:01 PM   #79 
     - oh thank you 54anickel! I looooove pictures!  UpInArms   Apr-25-07 05:59 PM   #78 
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  - Morning Marketeers.....  AnneD   Apr-25-07 09:14 AM   #22 
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  - *gasp* "Such fraud robbed lenders of an estimated $1 billion last year"  Prag   Apr-25-07 09:54 AM   #32 
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  - Tokyo stocks fall on growing worries over U.S. economy  Ghost Dog   Apr-25-07 07:32 AM   #8 
  - Hitachi Construction profit up 51 pct, sees growth  Ghost Dog   Apr-25-07 10:04 AM   # 
  - Asian Stocks Drop on U.S. Demand Concern; Toyota, Samsung Fall  Ghost Dog   Apr-25-07 07:33 AM   #10 
  - China's new-old inflation paradigm  Ghost Dog   Apr-25-07 07:42 AM   #12 
     - China Humbles U.S., Japan in Asian Charm Game  54anickel   Apr-25-07 09:55 AM   #33 
     - What’s Behind the Euphoria in Shanghai Red-Chips?  Ghost Dog   Apr-25-07 10:14 AM   #37 
     - I was just reading that earlier over at The Market Oracle. Must be that  54anickel   Apr-25-07 10:53 AM   #45 
     - The Chinese realize one simple thing.  roamer65   Apr-25-07 04:12 PM   #76 
     - Is China Too Hot?  54anickel   Apr-25-07 11:04 AM   #49 
  - German business confidence surges  Ghost Dog   Apr-25-07 07:35 AM   #11 
  - UK economy expands in first quarter  Ghost Dog   Apr-25-07 07:48 AM   #14 
  - European equities buoyed by bid activity  Ghost Dog   Apr-25-07 07:49 AM   #15 
  - Why are equity markets soaring as the economy falters?  54anickel   Apr-25-07 08:53 AM   #17 
  - Too much like 1929  54anickel   Apr-25-07 09:10 AM   #21 
  - Dollar-peg to GCC Currency can be Costly (a good example of the above):  Ghost Dog   Apr-25-07 10:49 AM   #42 
  - Bulls off and running, Dow over 13,000  54anickel   Apr-25-07 09:14 AM   #23 
  - 10:15 - not so fast....  54anickel   Apr-25-07 09:17 AM   #24 
  - I'm wondering how much of the Dow bubble is funded with investments from the Credit bubble?  Prag   Apr-25-07 09:49 AM   #31 
     - Well, you could check out the weekly Credit Bubble Bulletin for a clue....  54anickel   Apr-25-07 10:04 AM   #35 
        - Voodoo economics replaced with Amway economics?  Roland99   Apr-25-07 10:14 AM   #36 
        - Thank you for your very thorough reply to my question....  Prag   Apr-25-07 10:24 AM   #38 
           - Heh, sorry about that detour to the often times long-winded Noland.  54anickel   Apr-25-07 10:49 AM   #43 
              - Oh, no way was it long winded...  Prag   Apr-25-07 11:02 AM   #48 
  - Fed up with tortilla costs -  54anickel   Apr-25-07 09:31 AM   #25 
  - Thanks for posting ...  AnneD   Apr-25-07 10:51 AM   #44 
  - US credit derivatives index nears launch  54anickel   Apr-25-07 09:40 AM   #28 
  - Step right up boys and girls!! See the best Magic Show on Earth!! Watch the  VegasWolf   Apr-25-07 09:56 AM   #34 
  - Daily Pfennig 4/25/07: Existing Home Sales Plummet...  mojavekid   Apr-25-07 10:34 AM   #40 
  - Love that quote  AnneD   Apr-25-07 11:47 AM   #56 
  - Fleckenstein: Danger! Market partying like it's March 2000  mojavekid   Apr-25-07 10:41 AM   #41 
  - Markets love a nooner! Everyone gets a pony today!  Roland99   Apr-25-07 10:58 AM   #46 
  - Can I have the one with an attitude? Time to "pony-up"  54anickel   Apr-25-07 11:11 AM   #50 
     - You got it!  Roland99   Apr-25-07 11:15 AM   #51 
        - I appreciate good horse flesh...  AnneD   Apr-25-07 12:01 PM   #58 
  - The Bond Bear  54anickel   Apr-25-07 11:17 AM   #52 
  - OT - From an Angry Soldier (Strong Language)  54anickel   Apr-25-07 11:34 AM   #53 
  - Works for me...  AnneD   Apr-25-07 12:05 PM   #59 
     - What would John McCain say?  ramapo   Apr-25-07 02:41 PM   #71 
  - Today's quote over at 321gold....  54anickel   Apr-25-07 11:36 AM   #54 
  - Speaking of David Walker. Here's the latest from The Concord Coalition  Roland99   Apr-25-07 12:52 PM   #60 
  - Gotta run...wanna get my errands done so I can catch Moyers tonight!  54anickel   Apr-25-07 11:59 AM   #57 
  - I am headed out to a meeting too.  AnneD   Apr-25-07 01:00 PM   #61 
  - If not for washers, dryers and fridges - we would really be screwed.  ozymandius   Apr-25-07 02:03 PM   #65 
  - 50 shit jobs  ozymandius   Apr-25-07 02:12 PM   #67 
  - Criminal charges possible in student-loan scandal  ozymandius   Apr-25-07 02:18 PM   #68 
  - six minutes before the close  ozymandius   Apr-25-07 02:55 PM   #72 
  - closing the door and sweeping the floor  UpInArms   Apr-25-07 06:04 PM   #80 
     - Let me get this straight....analysts lower expectations, companies  54anickel   Apr-25-07 07:16 PM   #81 
        - So close to hell  AnneD   Apr-25-07 07:54 PM   #82 
           - good night, Mary Ellen  UpInArms   Apr-25-07 08:33 PM   #83 

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