I meant to post this spreadsheet of CAF’s holdings yesterday, but had technical difficulties. You might find some of the columns interesting, such as date of 52 week high and number of days since 52 week high, etc.

CAF Holdings

One of the fund’s top ten holdings is China Merchants Property Development (listed in Shenzhen), which is down around 63% year-to-date and is 80% off its high. No idea what their cost basis is in this dog. The trend reversal last year was pretty clear so it would have helped to have a dirty-collared “technical analyst” on the staff to point it out at the time.

Readers suggested shorting the Morgan Stanley China A Share Fund (CAF) as a way to take advantage of the stock slide in China. I looked at the holdings of the fund (as of 3/31/08) and they only held 33 positions, including six stocks listed in Hong Kong with the remainder being Shenzhen- and Shanghai-listed A shares. This actively managed fund is not the best mirror of the Index as the managers try to earn their 1.73% fee through superior stock picking. Anyway, here is the performance chart of the CSI 300 Index and CAF, along with CAF’s short interest chart.

There are no stock index futures in China so it’s impossible to take advantage of the dramatic decline underway here. This is the 15-minute chart — the weekly and daily trends are all down so it’s just a matter of hitting it every time it reverses on the smaller time frames. Sadly there is no way to short.

Here’s a screenshot from my monitor following today’s trading in China. That’s a daily chart of the CSI 300 Index on the bottom and the quote sheets above list the 70 or so most actively traded stocks — if you don’t know which ticker symbols represent which companies, you’re out of luck, sorry.

Note that “limit down” is 10% and that there’s no way to “sell short.” The sheets also have columns which list the 52 week high date and price for each issue, which you may want to study. A lot of folks who came late to this party are deeply underwater.

We have our answer about whether the late April, early May jump was a “sucker’s rally.” Moving to the US markets, with one eye on Lowry’s (abysmal) Buying Power numbers, we can anticipate a similar breakdown in the major averages, yes?

Related:
China’s Stock Markets Have Topped, November 8, 2007
What It Will Look Like When the Chinese Stock Bubble Bursts (Try Try Again), March 30, 2008

A few selected excerpts (with my notes in []) from the latest China Consumer Survey (192 pages of pure gold) from CSFB:

Average monthly household after-tax income tier-1 cities (RMB) 5,374 (2004) 6,046 (2005) 5,703 (2006) 7,203 (2007)

Average monthly household after-tax income (RMB) 4,486 (2004 etc) 5,081 5,043 6,180

Median monthly household after-tax income (RMB) 3,770 (2004 etc) 3,940 4,200 4,790

Average monthly after-tax personal income (RMB) 2,013 (2004 etc) 2,121 2,129 2,500

“Experiences in the US and Japan indicate that when per-capita GDP reaches around US$2,000 (in 1951 for the US and 1970 for Japan), private consumption starts to become the key driver of the national economy, reflected in rising private consumption as a percentage of GDP.” [As I’ve said again and again, “per-capita” is the wrong way to try to understand anything in China.]

“only about 20% of urban households own a car” [$200 a barrel crude is a gimme]

Planned budget for new auto purchase (RMB ’000) 131.3 (2004) 146.0 (2005) 128.4 (2006) 166.8 (2007)

Average spending per restaurant meal (RMB) 49.9 (2004 etc) 51.1 51.1 56.5

Planned budget for handsets current owners (RMB) 2,138 (2004 etc) 2,202 2,162 2,138 [that’s a lot of money, even if there’s no growth (normal tech price deflation)]

Total monthly spending on online games (RMB) - 68.7 (2005 etc) 59.2 65.2 [not a category in 2004]

Budget for overseas travel in next year (RMB) 14,760 (2004 etc) 16,438 13,532 15,852 [this is why you *must* own CTRP]

“respondents with college or above educations expect 26% income growth” [great expectations]

“We think that the official data is underestimating the income of Chinese residents, mainly due to under-reporting of income by the high-income group to official statistical agencies.” [massive tax evasion in China, no collection system outside of multinationals (where the tax collection is *extremely* efficient :) )]

“Which mobile carriers are you using?” 76% Total domination by China Mobile (0941.HK) [yes, I use China Mobile]

“Which Chinese brands of sports clothing or sports shoes have you bought?” 50% Li Ning dominates among domestic brands (2331.HK) [I remember well the incredulity when I first asked ‘who in god’s name is Li Ning?’]

“Which is your favourite online game?” 20% QQ game zone (0700.HK)

“Which instant messaging software do you use most frequently?” QQ (again) 47% [though in my experience here in Beijing, MSN has huge share]

“Which blog site do you use most frequently?” 23% Sina (SINA (Nasdaq))

“Which search engine do you use most frequently?” 61% Baidu (BIDU (Nasdaq)) [I’m a Google man myself but they have a tough row to hoe here.]

“Which portal do you use most frequently?” Sina and Sohu dominate [I can’t bear to visit these because of the blinky flashies and incredibly dense text, but the locals are unphased by the horrific design.]

Here’s a look at the intraday chart of the Shanghai Composite Index over the last five days. You can see the dramatic gap down on the morning of the 30th following the news of a higher stamp tax. The trend has clearly flipped down on the smaller time frames and short-term traders would be looking to short the intraday rallies. It’s impossible to go short in China, but you know what I mean.

Here’s bellwether CITIC Securities’ intraday stock chart following the break. Any day trader would be stalking this doggy from the short side — you’ve gotta assume there are a ton of people trapped long above 55 and they’re scared.

Related: CITIC Securities and the Manic Manicurists

Selected excerpts from the World Bank’s recently released China Quarterly Update:

Although there appears to be some loan financing of share transactions taking place, the bulk of funds entering the market are being channeled out of bank deposits.

The impact [of a stock market crash] on the real economy via reduced consumption and investment is likely to remain limited. Because of the still modest exposure to equities, wealth and balance sheet effects that could drive domestic demand downwards are likely to be limited.

The exposure of the banking system to the stock market, directly or indirectly, seems limited: although there are no good data on this, CASS estimated that the exposure may add up to RMB 300 billion, which is a modest 1 percent of the total deposit base and 5.5 percent of stock market capitalization of tradable shares.

The authorities need to continue to act decisively and transparently against illegal market activity, including insider trading, price manipulation, and provision of false information.

But if they cleaned up “insider trading, price manipulation, and provision of false information,” they would effectively shut down the markets here. ;-)

(There’s also a section at the end of the report on the “Underpricing of IPOs” that’s worth reading.)

Here’s a historical look at the Shanghai A-share market turnover (in US dollars). This chart is arithmetically scaled to give it the drama it deserves. Keep in mind that this is only the Shanghai A-share market and the chart does not include the turnover in the A-share market in Shenzhen or the B-share market in either city. If you add them all up, China is doing over $50 billion in daily turnover these days. Wild!

Thanks to commenter “Punting Analyst” who hipped me to the Bloomberg function VALU. You can see how enormous the Chinese A-share market turnover is compared with other Asia-Pacific markets, including Japan. I got some historical data too for turnover and even some breadth (advances vs. decliners) data for the Shanghai market, but I’m tired and have been drinking so I’ll leave the charts for this weekend.

Click to enlarge

Related: Crazy Turnover in China’s Stock Markets

James Areddy writes Chinese Investors Crunching Numbers Are Glad to See 8s:

… the Chinese investing public’s trust in the predictive power of numbers — rather than fundamentals like business prospects or profit — is one of many reminders of how buying on the Shanghai and Shenzhen stock exchanges looks like gambling.

Brokerages are set up like casinos. Investors drink tea, smoke and chat as they make trades on computers lined up like slot machines. Instead of dropping in coins, they swipe bank cards to pay for shares. In China, individuals, often with little understanding of financial concepts, make up 60% to 80% of trading.

The absence of a free press in China and regulatory constraints on what financial analysts can say publicly leave investors vulnerable to unusual trading theories. They often make do with folksy trading tips such as those now circulating among investors advising people to wear red clothes, which are representative of a “hot” market, and to eat beef to sustain the “bull” run, while avoiding references to “dad,” since the word in Chinese is a homonym for “drop.”

Areddy ends the article by quoting a Chinese investor who says “in the stock market, half your results come from luck.” If you’re picking stocks based on “lucky” ticker symbols then a lot more than half your results come from luck.

UPDATE: The Bespoke guys ran the numbers… interesting post.