Where I lead 'The Wall Street Journal' follows!

Just yesterday I warned that all was not well in the People's Republic of China and today The WSJ says the same.  Or to be precise, it reports that the analysts in the big investment banks are pushing Chinese stocks as hard as they can.  Does that bring back memories?  It should do because it was exactly the same type of behaviour they displayed prior to the dot.com bubble in the '90s:

In bullishness reminiscent of the technology bubble of the 1990s, analysts who work for investment banks based around the world rate nearly every Chinese stock they cover as a "buy." While these analysts generally are a bullish lot, they are far more positive on Chinese banks, tech companies, retailers and the like than they are on companies based elsewhere.

Of course, the fact that big investment banks are always looking for corporate business would have no effect on their analysts' briefings, er, would it?  I don't know, but for sure, if you followed their advice and invested in their recent recommendations then overall you would have lost money:

Investors who followed analysts' bullish recommendations haven't fared well this year. The Shanghai Composite Index has dropped 15%, and in Hong Kong, where Chinese companies account for two-thirds of the trading volume, the Hang Seng Index has fallen 23%.

The short-sellers, on the other hand, who bet their own money on their belief that a company's share value will drop, have been doing exceedingly well, not least because they have been sniffing out corruption and other misdemeanours which are endemic in many Chinese corporations:

Last Monday, claims by short-seller Muddy Waters Research LLC against Chinese advertising company Focus Media Holding Ltd. sent the company's shares down 39% on the Nasdaq Stock Market. Analysts still have 11 buy ratings and no sell ratings on the stock. A short seller bets that a stock price will fall. Focus Media disputed Muddy Waters's claims, saying the short seller's report misinterpreted LCD-display numbers and financial data. The shares gained back about 14% by the end of the week.

As for me, personally, I just wish I had a ton of money invested in Chinese companies.  But if I did, I'd sell it before lunchtime!

 

Comments

[JK]

Bugger China. Pour a large, extremely stiff one.

Straight. No water. No ice.

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

[David Duff]

Or, 'Buddy can spare several zillion dimes?'

[Andra]

China is about the only thing keeping Australia's head above water for the past few years.

I read a very small article about three weeks ago which said that China is now cancelling or postponing delivery on some of their huge iron ore and coal purchases from Australia.

This is very scary for us and yet I have not seen or heard another word about it since then. it would appear to be a secret. But I know!! And so do you, now.

[David Duff]

And now so do several, er, zillion of my enormous readership!