Short the Chinese Stock Market

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It may be time to short the Chinese stock market lock stock and barrel if speculation about the size and nature of China’s debt is true. The issue is one poor transparency or outright deception by way of hiding debt or reclassifying debt so that it shows up on a different balance sheet. China has become an industrial powerhouse and borrowed along the way. It has attracted huge amounts of foreign investment. The thinking is that no one wanted to be left out of a huge economic advance in an economy that routinely grew at 10% per year. Now as growth rates fall and projections fall even further it may be time to short the Chinese stock market. Precise timing may depend on technical analysis of stocks that trade as ADRs in the USA. Or one might consider buying options on Chinese stocks that trade in the USA with a majority of these trades being puts.

How Has This Come About?

Short the Chinese stock market? Isn’t this the country that grows at ten percent per year and that will overtake the US economy in a couple of decades? Here is a little background info to help give you a basis when you decide to trade Chinese stocks and especially if you decide to short the Chinese stock market. Despite the amount of investment in China fundamental analysis is difficult when large amounts of debt are hidden from the investor. What concerns many is that China often takes government debt off the books. When the Asian currency crisis hit in the late 1990’s Indonesia, Korea, and Thailand were in trouble. China avoided the worst but still found that its banks had written a huge number of loans that became uncollectable when foreign investment faltered with the currency crisis. What China did was to create “management companies” for its four major banks. These companies took over the debt from non-performing loans and issued bonds for these assets. The bonds were for ten years and the problem was swept under the rug. This may have caught up with China as it has pursued rapid growth to maintain political support for the ruling Communist Class.

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Short the Chinese Stock Market

  1. 1. Short the Chinese Stock Market By: www.ProfitableTradingTips.com
  2. 2. It may be time to short the Chinese stock market lock stock and barrel if speculation about the size and nature of China’s debt is true. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  3. 3. The issue is one poor transparency or outright deception by way of hiding debt or reclassifying debt so that it shows up on a different balance sheet. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  4. 4. China has become an industrial powerhouse and borrowed along the way. It has attracted huge amounts of foreign investment. The thinking is that no one wanted to be left out of a huge economic advance in an economy that routinely grew at 10% per year. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  5. 5. Now as growth rates fall and projections fall even further it may be time to short the Chinese stock market. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  6. 6. Precise timing may depend on technical analysis of stocks that trade as ADRs in the USA. Or one might consider buying options on Chinese stocks that trade in the USA with a majority of these trades being puts. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  7. 7. How Has This Come About? By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  8. 8. Short the Chinese stock market? Isn’t this the country that grows at ten percent per year and that will overtake the US economy in a couple of decades? Here is a little background info to help give you a basis when you decide to trade Chinese stocks and especially if you decide to short the Chinese stock market. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  9. 9. Despite the amount of investment in China fundamental analysis is difficult when large amounts of debt are hidden from the investor. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  10. 10. What concerns many is that China often takes government debt off the books. When the Asian currency crisis hit in the late 1990’s Indonesia, Korea, and Thailand were in trouble. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  11. 11. China avoided the worst but still found that its banks had written a huge number of loans that became uncollectable when foreign investment faltered with the currency crisis. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  12. 12. What China did was to create “management companies” for its four major banks. These companies took over the debt from non- performing loans and issued bonds for these assets. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  13. 13. The bonds were for ten years and the problem was swept under the rug. This may have caught up with China as it has pursued rapid growth to maintain political support for the ruling Communist Class. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  14. 14. One Family, One Child and an Aging Population By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  15. 15. China has had and enforced a one couple one child rule for decades. This policy has slowed growth in the world’s most populous nation to where India recently passed China as the nation with the most people. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  16. 16. This policy has also resulted in the aging of China’s population. The traditional means of supporting the old in China is gone with its large families. Although the Chinese are big savers the government has no retirement programs and no health insurance programs for the elderly. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  17. 17. Old age costs will come out of savings. The high savings rate in China will not come to the government’s rescue in a time of high national debt. It will go to caring for the elderly. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  18. 18. When this view of things sinks in it will likely result in a less positive view of investing in China. And, when China no longer has access for foreign investment and needs to draw down on its foreign currency reserves it will affect stock prices. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  19. 19. Profitable trading requires that one see the future and prepare to short the Chinese stock market. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  20. 20. When to Short the Chinese Stock Market By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  21. 21. When to short stocks is when they are riding high and before everyone else heads for the exit. China may well be a good investment in the long term. But there is potential for healthy profits if you choose to short the Chinese stock market in the near term. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market
  22. 22. Trading exchange traded funds that focus on Chinese stocks may be a good way to approach this issue. When to short the Chinese stock market is probably now. As always do your own fundamental and technical analysis before trading any stock. By: http://profitabletradingtips.com/profitable-trading-tips/short-the-chinese- stock-market

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