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China’s Stock Market Plunges
Topic Started: 27 Jun 2015, 11:54 AM (19,959 Views)
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Terry
27 Jun 2015, 02:05 PM
Most Chinese investors don't have a high-school degree.

People often say that stock markets follow the "greater fool" theory - even if a stock is irrationally overvalued, it still might be worth purchasing if there is another fool out there willing to pay a higher price.

That may now be the calculus for many Chinese stock investors. As high as valuations are, novice investors keep rushing into the market. Just last week, 1.41 million new investors opened stock accounts, according to Reuters, a similar number to each of the two weeks before.

The make-up of these new investors isn't encouraging. A survey last year showed that that two-thirds of Chinese investors haven't completed high school. Even Chinese farmers are giving up tending their fields in order to tend their stocks. And many investors are young: According to Chinese-language media cited by Foreign Policy, over a third of China's 100 million investors are 30 or below.

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/06/24/meet-the-worlds-biggest-stock-market-bubble-since-the-dot-com-boom/

Kind of like Australia where many people believe they are a mini Donald Trump.
No I meant why did the Central Government allow it, even encourage it?

Forget the common man, they're as stupid as any citizen in any country.

But it surprises me that the Central Government allowed this.

Chinese bureaucrats must have studied economic history and noticed nobody in the world does margin lending (to men on the streets) anymore.

Why did they allow and encourage it?
Edited by createdby, 27 Jun 2015, 02:16 PM.
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miw
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Terry
27 Jun 2015, 02:05 PM
Most Chinese investors don't have a high-school degree.
May have been true 15 years ago, but the generation who missed out on on a good education because of the cultural revolution are pretty much all past retirement age now, and even then a fair proportion of those got a a high school finish.

Since 1980 nearly everyone has graduated from high school and now 60% are attending tertiary education.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Terry
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miw
27 Jun 2015, 02:20 PM
May have been true 15 years ago, but the generation who missed out on on a good education because of the cultural revolution are pretty much all past retirement age now, and even then a fair proportion of those got a a high school finish.

Since 1980 nearly everyone has graduated from high school and now 60% are attending tertiary education.
It is true based on the China Household Finance Survey, which is run by the Southwestern University of Finance and Economics (SWUFE) in Chengdu. You can access the data with a few keystrokes.
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zaph
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createdby
27 Jun 2015, 02:16 PM
nobody in the world does margin lending (to men on the streets) anymore.
All Australia's major banks do margin lending (to men on the streets). I would also be almost certain that most banks in most countries also do it.
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miw
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Terry
27 Jun 2015, 02:46 PM
It is true based on the China Household Finance Survey, which is run by the Southwestern University of Finance and Economics (SWUFE) in Chengdu. You can access the data with a few keystrokes.
Actually, I don't think you can.

By all means post a link to the site which proves me wrong.

There's a Bloomberg article out there saying that the more than half the people who have piled into stocks since 2013 have less than a high-school pass, but even that report doesn't make that claim about the overall investor base for stocks, let alone for all investors.
The truth will set you free. But first, it will piss you off.
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Terry
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miw
27 Jun 2015, 03:40 PM
Actually, I don't think you can.

By all means post a link to the site which proves me wrong.

There's a Bloomberg article out there saying that the more than half the people who have piled into stocks since 2013 have less than a high-school pass, but even that report doesn't make that claim about the overall investor base for stocks, let alone for all investors.
http://qz.com/371412/two-thirds-of-new-investors-in-chinas-stock-market-mega-rally-didnt-finish-high-school/
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Count du Monet
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createdby
27 Jun 2015, 02:16 PM


Chinese bureaucrats must have studied economic history and noticed nobody in the world does margin lending (to men on the streets) anymore.

The Banks will loan money for any purpose what so ever, but the loan is secured by a mortgage. So many years ago the loan was strictly for a genuine mortgage, but that is long since gone. Your house is now an ATM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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zaph
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Count du Monet
27 Jun 2015, 04:32 PM
The Banks will loan money for any purpose what so ever, but the loan is secured by a mortgage. So many years ago the loan was strictly for a genuine mortgage, but that is long since gone. Your house is now an ATM.
That is generally correct, within in reason.

But it is not necessary to offer property as collateral to get a loan to buy shares. A straight up margin loan with shares as collateral is still possible to buy shares - the LVR is lower and the IR higher however. It's cheaper to buy shares on leverage using property as collateral (and no margin calls) - or you could create a storm and do both.
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newjez
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Mike
27 Jun 2015, 11:54 AM
http://www.nytimes.com/2015/06/27/business/international/chinese-stock-indexes-plunge.html?_r=0




I warned of this awhile back. Forget Greece, forget the US. The Chinese stock market is the greatest threat to the world economy. If this bust accelerates, it will cripple the Chinese economy. The stock market bust will accelerate the housing market declines happening right now. It will further reduce GDP growth and destroy the savings of millions of small time Chinese investors. This could very well lead to Chinas first modern recession or worse.

Chinas main stock index is up 160% in 2 years, not accounting for recent falls. What happens if the market corrects and it loses 50% of its current valuation. How does this effect the Chinese economy. How does a centrally planned economy respond to such massive market forces.

On the plus side for Australia, we could see massive amounts of cash fleeing China and into Sydney property prices, further inflating that bubble. A plus at least for the short term. I say sell to the Chinese now at high prices and us Australians can buy it back when the market crashes just like we did to the Japanese in the early 1990's.
Umm, I don't disagree with the overvalued market. But when the market rose so sharply did it add to GDP? And if not, why will it detract when it falls. I'm not sure if a market correction is directly connected to the general economy? I would be interested in someone like b_b take on this. But I suspect it will be a damp squib.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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miw
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Terry
27 Jun 2015, 04:06 PM
Well, that is not at the website you mentioned, and it certainly doesn't say that more than half of chinese investors don't have a "high school degree".
The truth will set you free. But first, it will piss you off.
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