January 30, 2007
No Margin, No Problem
Best bit from an A1 article in today’s WSJ: Stock Frenzy In China Stokes Official Concern:
Regulators say they are increasingly seeing signs that investors… are teaming up with merchants to, in effect, borrow from their credit cards, presumably hoping that stocks will rise enough before the bill comes due to pay off the debt.
The credit-card maneuver typically involves a merchant who agrees — in return for a commission — to process a transaction that allows the cardholder to get cash at a lower cost than a conventional cash advance.
(China still doesn’t permit brokers to offer margin trading, or investing with borrowed funds, to individuals.)
I haven’t heard of this but then again I haven’t been asking around. All the classic signs of a bubble are in place — manicurists giving stock tips, folks borrowing against credit cards to go long, day trading grannies, parabolic price moves, etc. It should get ugly but it’s impossible to short stocks (卖空) here so there’s no easy way for me to cash in on the coming crunch.
Related: How Do You Say Textbook Fibonacci Retracement in Chinese?
January 30th, 2007 at 3:16 pm
Certainly you can short FXI if you want some exposure to the short side there, even if it’s not a stock (??) per say.
January 30th, 2007 at 3:18 pm
pancho: Yes, true, but the FXI is kind of a “blue chip” group and it would be nice to short the real junk (locally) that has gone nuts.
January 30th, 2007 at 7:45 pm
How about options? Or via HK listings? 我想在中国应该什么都有办法..? ;-)
January 30th, 2007 at 9:26 pm
Eyal: Yes, there’s always a 办法 … There are H-share futures and options in Hongkong, but again the companies listed there tend to be a little higher quality and I want to short the dogs, the real junk, the absolute dregs which have all inexplicably risen 200-400%.
January 31st, 2007 at 6:33 am
Is CN in the junk pile?. Looks it retraced 38% since you showed it launching out of control. Does it have any gas for a second blast or will it lose orbit? Actually, I don’t China could deal with 100 million margin calls at this point.
January 31st, 2007 at 7:19 am
Hudson: China Netcom is an FXI component so it’s not junk. Basically I’m looking for the Pets.com sock puppet stocks within China’s bubble market.
January 31st, 2007 at 8:46 am
you can’t short stocks?? WTF?
January 31st, 2007 at 9:54 am
Alex: Nope, no shorting allowed… it’s “un-Chinese.” ;-)
January 31st, 2007 at 10:30 am
Same in Israel, no shorting. But you can achieve that with options or local ETF structures.
January 31st, 2007 at 10:58 am
Eyal: I think no shorting is the rule rather than the exception in most of the world… what do you mean by “local ETF structures”?
January 31st, 2007 at 11:10 am
Yeah that makes sense, it was the same in NZ.
They are ETF’s like QID (I’m guessing), not sure how they are constructed though. They allow the average joe to short the main indices like TA25 and TA100 etc. Other than that banks can build a financial structure for the uninitiated, mostly using some underlying asset (stock/govt bond) + options. It would typically involve inflated commission built into the product. I hear these are getting very popular over there.
January 31st, 2007 at 11:12 am
Eyal: Oh, I see, a kind of inverse instrument that one could get “long.”
January 31st, 2007 at 11:16 am
Yes, succinctly put :-)
February 4th, 2007 at 6:31 am
I went long on FFHL, because It looked solid compared to some of these other china plays. After the recent talk of the china bubble burst, it has taken big dip. So is it time to cut losses and get out, or buy more?
February 4th, 2007 at 9:39 am
Sam: Never heard of Fuwei, thanks for alerting me to it. I have no investment advice to offer.