May 17, 2007
CITIC Securities and the Manic Manicurists
CITIC Securities is one of the major brokerages in China and everyone is keeping a very close eye on it; it’s something of a bellwether. The stock has gone from around 15 last November to around 60 today, as millions of manicurists have opened trading accounts looking to get rich quick.
Some manicurists heard from other manicurist friends over the May Day holiday how easy it is to make big money buying stocks, got jealous of their friends’ effortless success, and came back resolved to get into the action. Thus the gap up to an all-time high on May 8th. The only trouble is an island reversal formed there, trapping these latecomer manicurists.
In today’s trading, price jumped right back up into the May 8th range, but then sold off as some of those latecomer manicurists had second thoughts and wanted to get out at “breakeven.” The trading day is so short (only four hours: 9:30 - 11:30, 13:00 - 15:00) that day trading isn’t practical or even possible since there are no margin accounts in China. No word on how many Chinese have read Jeremy Siegel’s book, Stocks for the Long Run, thus assuring their absolute ruin in the short run.
Will the May 8th high hold and mark a top, or will the manic manicurists push price above and squeal with delight? Tune in tomorrow for another episode of the (Maybe) Getting Rich (Quick) is Glorious.
You can see that trading is active enough now to draw a clean five minute chart — impressive.
Several screens from the Bloomberg:
CITIC Securities does RMB 2.4 billion in turnover today. Note the banks: China Minsheng, ICBC, and China Merchants all have huge turnover.
CITIC Securities is the leading index point gainer for the Shanghai Composite today. Also note the Shanghai Composite breadth on this screen: 757 Up, 66 Down, 62 Unch. This is just the information I need (up versus down volume would be even better), but I can’t find historical breadth data on the damn machine.
A typical new highs/lows screen these days: 359 new highs, 0 new lows. And check out those 52-week high versus low differences — aren’t you glad markets are efficient? (Yeah, right. ;-) )
May 17th, 2007 at 11:52 pm
How can we make money when the chinese stock market will go down ?
Shorting FXI ? What other choices ?
May 18th, 2007 at 12:31 am
stock market used to be open 6 days a week here, but with shorter hours (i think 10-3 during week, 9-12 on saturday?)
May 18th, 2007 at 2:06 am
That’s quite the uptrend.
Is it easy for those manicurists you mention to get loans and credit in China? Is that helping to drive it up? Or is this purely psychological?
May 18th, 2007 at 4:41 am
max,
there are the Chinese ADRs, as well as the two Chinese ETFs and the Asian ETFs.
May 18th, 2007 at 5:11 am
jp: I’m not sure how easy it is to get a “legitimate” loan in China, but apparently the loan sharks and pawn shops are doing a very good business these days. If this market cracks, a lot of kneecaps are going to get busted as well.
May 18th, 2007 at 7:02 am
Henry Paulson was just on PBS talking about how much money (trillions) the Chinese have in savings - and how they would benefit from a higher interest rate on these savings (now about 2%), and how they would benefit from all they could buy from America…maybe this is the Chinese solution.
May 19th, 2007 at 4:55 am
lol, hilarious writeup… so how do you profit from a Chinese blowup? Short commodities?
May 19th, 2007 at 7:55 am
Alex: Long manicurists.
May 19th, 2007 at 6:42 pm
Hm, is there no other higher leveraged vehicle to short the chinese market ?
ETF act kinda lame.
June 1st, 2007 at 8:47 am
[…] Related: CITIC Securities and the Manic Manicurists Cat: […]
July 4th, 2007 at 12:19 am
[…] Checking up on bellwether China stock, CITIC Securities, you can see that the daily trend flipped down last week and the Manic Manicurist highs were never surpassed. Trading activity on the Chinese stock markets has plummeted in recent weeks as prices have fallen — this is what happens in a market that’s impossible to short. […]
September 27th, 2007 at 4:48 pm
[…] I first wrote about CITIC in May, foolishly disparaging my manicurist for her stock picking savvy. She still does my nails as a “courtesy” even though she’s now richer than me. ;-) […]