Hence why the PBOC is losing cred, they tell everyone and their mum to invest and then goes down the tubes in just 3 weeks. Plus a lot of Chinese people love a good punt, we see that all the time, when they spin the wheel they spin it big.
Disclaimer: I'm Chinese and deal with Chinese investors, in case anyone thought I was being racist
I can't understand why the Chinese government thought that was a good idea.
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Could probably debate this to the moon and back but from what I understand it's so that they can use the stock markets to raise capital for companies. There is too much debt (that is also going sour now) floating around so they are trying to tap in to the very large amounts of equity floating around inside savings to try balance that out.
Of course the irony is not lost in me in that raising equity with debt is really just debt anyway...
The following user says Thank You to PeakGrowth for this post:
I completely agree with your two posts. I do not understand the overall strategy of basically just moving the debt around and financing it with more debt in another sector. Yes the Chinese need a way to get financing for companies, by this i mean entrepreneurs who are actually building value. This was supposed to go through the IPO mechanism and 3rd tier exchange because the banks were just not giving out credit on good terms and making it too difficult and expensive. But it ends up being a giant ponzi scheme as everyone just has laid off debt with someone else, all of which is making interest in some cases in excess of 15%. Around 8% is what rich people consider the risk free rate.
The following 2 users say Thank You to treydog999 for this post:
My take on this market situation is that it's basically just China's version of Nasdaq 99 - complete with a similar ending (albeit their govt steps in and tries to prop it up).
I trade this nightly on SGX (IB symbol XINA50, Barchart: HN) and it's more active than US futures. Huge volume, big moves, great stuff. Liquidity, and IMO action, is better than HSI or MHI (Hang Seng and Hang Seng mini). There are correlations with HHI.HK and MCH (Hang Seng China Enterprise and the mini variant).
I've traded through both days of recent limit moves (1st day was 2 limit downs, 2nd day was limit up within an hour) and at no point was it untradeable. Something to be aware of though is that if near the limit the exchange will reject your profit target for being outside the current limit. I don't expect it to be making any 2nd limit moves this week and there may even be trading interruptions with the approaching typhoon.