Making a conclusion on a country’s land policy based on the opinions of it’s diaspora is one of the silliest things I’ve read today and I hang out on reddit sometimes.
It doesn’t cost ‘hundreds of thousands’ of dollars to take a vacation to the USA.
While there is an influx of Chinese money into Canada , Canada’s relaxed immigration policy means there are lots of unskilled workers flooding that country. If you look at the statistics of USA , Britain , Australia etc you will see that Chinese (and Indians) have quickly risen to become the highest earning ethnic sub-groups where as in Canada they are just above average. ( I just felt like pointing that out).
China’s economic policy is nothing like Russia’s and neither is it’s government. For one the government is actually invested in giving their citizens the best quality of life and opportunities they can aspire to unlike Putin. The only commonality is that they are secretive and both view democracy as messy. In China’s case it is hard to argue against when you consider just how much the country suffered from Western and Japanese influence.
The Chinese elites that are ‘disappearing’ are those that are found guilty of corruption. An effiicient manner of handing out justice swiftly.
Saying China’s political climate will shift drastically sounds ridiculous. There has never been a case in history at all where the people of a reigon experiencing break-neck growth and dramatic rise in living standards have demanded a change in the political system.
allright. im not biased. here are juss sum facts. what ur saying is right. sum does have lower pes and there is i guess a lot of divergence. i dont kno enuff specifics, but why would i want to buy in area that is generally overvalued, when i can easily go in other cheaper ass markets.
For the basic insanity, consider instead the median company’s valuation, based on forward price/earnings ratios:
Shanghai: 30x
Shenzhen: 39x
S&P 500: 18x
Russell 2000 (US smaller companies): 18x
Nasdaq Composite: 18x
Here’s a numerical fact-fest of China’s senseless markets, split by Shenzhen (the frothiest) and Shanghai listings, with a comparison to US small caps added for context:
Shenzhen:
Half of stocks with analyst estimates have a forward PE above 50.
18% of stocks have a forward PE above 100.
So far this year 244, one in six, shares have doubled in price or better.
4 stocks have fallen this year, nine have fallen in the past 12 months.
In the past 12 months, almost half of all shares have doubled in price or better.
There’s been one tenbagger (shares rising tenfold) in the past year.
Shanghai:
Over a third of stocks with analyst estimates have a forward PE above 50.
A tenth of stocks have a forward PE above 100.
So far this year 58, or one in 17, shares have doubled or better.
10 stocks have fallen this year, four have fallen in the past 12 months.
In the past 12 months, four in 10 stocks have doubled in price or better.
There have been no tenbaggers: a clear sign of value. Or not.
Russell 2000:
Less than a tenth of stocks with analyst estimates have a forward PE above 50
Just 4% of stocks have a PE above 100.
So far this year 12, or less than 1%, of stocks have doubled or better.
888, more than four in ten, shares have fallen this year, and 710 fell over the past 12 months.
In the past 12 months, 2.6% of stocks (49) doubled in price or better.
Okay, so it’s not that (many people on here HAVE said they are pissed about it), but you’re still wrong.
People who actually know what’s happening in China (not people on this thread) know that the govt is making moves to open things up, and they want things stable. They want to keep the RMB stable so that it becomes widely used. They want foreign capital coming in, and the last thing they want it some disruptive policy move that will make capital turn and run. They are also working on making the state-owned enterprises not state owned, or at least not state run (I’m not up on the details, but changes are happening fast). There won’t be any crazy seizing of our stocks or whatever.
You don’t know anything about the market, you have ONE observation from living in Canada, and from that you construct an investment decision about A-shares. That’s a fail.
Also, the other person who posted a bunch of statistics is totally off, stats don’t take the place of actually knowing what you are talking about.
you can all enjoy investing in the most expensive market of all time. when its crashes, like it looks to be doing, right now, you can thank me in hindsight.
“It doesn’t cost ‘hundreds of thousands’ of dollars to take a vacation to the USA.” - i was referring to chinese that pay upwards of a $100,000 to have their baby in the US so that they are citizens and can re-enter the country with ease in the future, when $hit hits the fan.
“People who actually know what’s happening in China (not people on this thread) know that the govt is making moves to open things up, and they want things stable.” - yes. let’s all drink the central bank kool-aid and believe that monetary stimulus will solve the world’s problems forever. let me guess, you’re levered up 100x in every market and think valuations will go to 1000x earnings and that market crashes have only ever happened in 1929, 1987 and 2007.
it’s not about the seizing of stocks. its about what political construct exists after the communist party disappears? will it be true democracy? will it be oligarchy? will it be dictatorship? the risk isn’t near-term and immediate. it’s what happens to government when China’s hey-day is over. if you can tell me with 100% certainty that China will be a democracy similar to North America, Europe or even S. Korea in 30 years, i’d be happy to invest in average Chinese companies and 18x trailing earnings. in reality, i, most chinese, and most China commentators, believe that the transition will be tricky. provide me one example in real life wherein a country shifted from willful communism to democracy with ease, and no bloodshed.
i’m not saying China is the worst place on the planet. all i’m saying is that the political and regulatory risks are somewhat higher in China than countries like the U.S., Canada, Australia, Germany and the UK. if you refute that, there’s no hope for you.
Riiiight, this is what the “eventually markets will crash” people say all the time [the people who missed out].
Actually people made like 70% returns or whatever crazy amount back in 2014. I got in in Nov and made crazy returns here in 2015, sold almost everything over the last 6 weeks on peaks. All the while your detailed unbiased non-bigoted analysis would have no doubt said “don’t invest, China has no property rights!”. Thanks so much Matt for that great advice!
respect. more power to you. im guessing you are continuing to add on your position then and will reiterate your call on china for the next 10 years then?
i wasn’t bearish on china when it traded at 10x earnings in early 2014 and the many years before that. didn’t have much exposure outside of a few EMEA ETFs but not bearish. congrats on taking advantage of the move. i hope you sized it up and made it worthwhile. i also hope that you come to your senses and realize the 122% return is not an annual return expectation. part of the boost in the CSI was falling inflation from nearly 10% in 2010 to 2% now. if this reverts, expect much pain in the market’s multiple, beyond its current, obvious overvaluation nothwithstanding inflation’s effect on market multiples.
aside from falling inflation, can you provide me any reason why today’s market will remain at this level? is it the record number of new accounts opening? is it a record number of individuals quitting their low paying manufacturing job to become day traders? is it the global record margin balance that amounts to 3x the peak of 1929 in America? all of these things are clearly bullish to me haha.
it is not the Chinese goverrnment’s policy to inflation stock markets. their only policy is to maximize employment by avoiding the liquidation of companies and by supporting the creation of new jobs.
To corroborate MLA, Chinese (not immigrants, mainland Chinese) have driven up Bay area real estate prices to sky-high levels. They are stashing funds abroad. It doesn’t have anything to do with the Chinese stock market levels right now. They are just diversifying risk.
However - going forward, it’s hard to see Chinese stocks doing a lot better in a short time. PureAlpha - if you are saying they are a buy right now despite crazy valuations; why did you sell out of your positions?
Zidhai - as MLA said, the 100s of 1000s of $ are not for a vacation in US but to get a green card in US or Canada. MLA - I don’t think anchor babies factor in this, coming here to drop a baby won’t cost much money. Look at the illegal Mexicans whose anchor kids are US citizens.
It doesn’t cost 100s of 1000s of $ to get a green card in the US let alone a nation like Canada where you can get a skilled visa for a job as mundane as data entry which gives you a path to citizenship.
Again, using the behavioral tendencies of a nations diaspora to extrapolate a conclusion on the country’s real estate legality is one of the weakest arguments one can make.
^ we are talking about wealthy chinese rememeber. there are millions.
round trip flight for family: $10,000
residence for a few weeks if not months including hospital: $10,000
health care including midwife and/or OB: $10,000-$20,000
there are services in China that arrange all of this including food and all transportation for $50,000 minimum.
the thousands that i speak of are nothing compared to the ones you are talking about, but the ones you are talking about have at least $10,000 to spend on flight and accomodations, even if they simply want to have their baby in a U.S. Dumpster brand dumpster.
but this is all besides the point anyway. the key point is talk to Chinese nationals. get a feel for their concerns. they are concerned about their government. a beetle could identify the western world as being far more free and democratic than China. if the West is on one side of the spectrum and Russia is on the other, China is in the middle. the definition of their economy, the government’s policies and the government’s actions dictate it.
If these people wanted to get out of China so bad because they thought shit is going to hit the fan then rather than forking out ~50,000$ it would make more sense to spend it on getting a Canadian citizenship where the most expensive option does not exceed 3,500$ provided you have an undergrad degree and can manage to enter data in Excel.
I stand corrected on some things but the logic still doesn’t tally. I suspect those babies being born in the USA are being done so that they have the best of both worlds (presumably the children still have all the rights of a Chinese citizen through their parents) rather than any fear of impending collapse. To put it into perspective I remember asking a Chinese person once ‘Don’t you feel like voting out your government sometimes?’. The response was ‘Why? They might make mistakes but they are doing the best they can for China and for us’. That is the fundamental difference between China and the nation you previously compared it to though to be fair you later backtracked.
I can see you don’t agree but if you really are betting against China long-term it seems destined to be a losing one.
we’re not talking long-term. if China was at 10x, i’d be in for the long-term. you’re talking about buying the most overvalued market in the world right now, and possibly the most expensive of all time. the buy and hold strategy has to be wrong in some cases and all signs point to this case.
Two different ways - you can get an EB-5 in US by investing $500K-$1M or you can spend 7-10 years of your life (if you are from India or China) hanging by a thread to get an employment-based GC. Put yourself in a wealthy Chinese person’s shoes - which one would you prefer? (A: #3, marry a US gold-digger, which is the quickest way - Kidding, because you’d have to be unmarried, and then stay marrried to her/him for at least 2 years, and have to get a pre-nup or a messy divorce.)
This is just to address Matt’s argument that the Chinese anchoring themselves abroad is a bearish sign. This is not necessarily true. Fact of the matter: even if all the bullish signs on China are true, a US baby will probably still have a better life than a Chinese baby. Even if Chinese stocks will increase by another 100%, the decision to anchor the baby in the US does not change.
As for real estate - yes, the Chinese are buying crazy levels of real estate in San Francisco, Vancouver or elsewhere. But they are buying real estate in China too - despite the capital restrictions. There are a shit ton of Chinese people with a lot of money. They are just buying everything everywhere. Sure, the Chinese government could decide to seize assets in China. However, they could do the opposite too - liberalize markets and shift the asset balance back into China.
Anyway, there are some troubling signs in China with respect to earnings multiples, leverage, and all that stuff. So maybe overall the bear case is true. However, Chinese people being mercenaries is not to me, a sign of investor sentiment.
I can see both sides of the argument, but I’m personally in the “unsustainable levels” camp. I may be completely wrong, and the nice thing about this one is for better or worse (I have no skin in the game) we’ll know within six months one way or another.
To me (and again, I could easily be very wrong given the fundamental opportunities for growth remaining throughout Asia), arguments from purealpha and zidhai relying to some degree to their closeness to the field are not comforting. They’re very reminiscint of ground level operators in each prior bubble I’ve seen claiming that their expertise and proximity give them additional insight whereas in fact it and the money they’d made had blinded them. Statements implying stats are meaningless are also familiar and remind me of dot commers saying brick and morter was dead, cash flow & P/E multiples were no longer relavant in valuations and then in the late 2000’s the many idioms that surrounded the real estate boom.
There’s very little real analysis to my argument other than that I cover sectors that are closely tied to China, but its just the feeling I have.
- Kidding, because you’d have to be unmarried, and then stay marrried to her/him for at least 2 years, and have to get a pre-nup or a messy divorce.)