Greenspan Warns on China

[HenryTo]

http://www.bloomberg.com/apps/news?pid=20601087&sid=amLtDwhTRnC4&refer=home

[rffrydr]

Still plenty of bullishness, Chanos is a "hedge fund":

http://ftalphaville.ft.com/blog/2010/01/26/134101/chanos-were-not-calling-for-a-china-crash/
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

rffrydr,

Your target of the four 4s on the Shanghai Composite is getting close. Folks are now calling for 4,500 - soon.

Note that the China's CSI 300 Index is different to what rffrydr is mentioning - but even that is now close to the 4,444 level. Also note that the P/E of 46 is really not a relevant number, since China does not use GAAP accounting and most of their accounting numbers cannot be trusted.
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China Stock Index Breaches 4,000 Points, After Doubling in 2007

By Zhang Shidong

May 28 (Bloomberg) -- China's CSI 300 Index rose above 4000 for the first time, driven by a surge in new investors who are ignoring warnings of a bubble to enter a market that's doubled this year. China Merchants Bank Co. paced the gain.

``There is lots of liquidity flowing into the market,'' said Fan Dizhao, who helps manage about $1.8 billion at Guotai Asset Management Co. in Shanghai. ``Even fund mangers dare not sell their shares at this stage, as no one knows when the rally will be over.''

The benchmark CSI 300, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 105.32, or 2.6 percent, to 4090.57 as of 1:23 p.m. local time. Investors opened more than 300,000 accounts a day last week, even as former Federal Reserve Chairman Alan Greenspan called the rally unsustainable and said the market may undergo a ``dramatic contraction''.

Merchants Bank, the nation's third-biggest publicly traded lender, rose 0.41 yuan, or 1.9 percent, to 21.53. China Petroleum & Chemical Corp., Asia's biggest oil refiner, also known as Sinopec, jumped 0.59 yuan, or 4.8 percent, to 12.99. China International Marine Containers Co., the world's largest maker of freight containers, gained 3.17 yuan, or the 10 percent daily cap, to 34.82

Households are shifting funds into the stock market, seeking better returns than they can get on their bank deposits. The central bank's benchmark one-year deposit rate, a ceiling for deposit rates commercial banks can offer, is 3.06 percent, little more than the nation's 3 percent inflation rate. The CSI 300 has risen 198 percent in the past year.

Asia's Most Expensive

Investors opened 362,719 accounts at brokerages on May 24, the fifth straight day the tally has exceeded 300,000, according to figures on the China Depository & Clearing Corp.'s Web site. So far this year, 20.9 million accounts have been opened, four times the amount in 2006, the clearing house's data shows.

The CSI 300 is now valued at 46 times earnings, making the mainland market the most expensive in the Asia-Pacific region.

Greenspan last week joined central bank Governor Zhaou Xiaochuan and Asia's richest man Li Ka-shing in warning of a bubble on China's stock market. The index fell 0.5 percent the day after Greenspan's comment. It resumed its gains the next day, closing 1.7 percent higher.

The CSI 300 has climbed 15 percent since May 6, when the central bank's Zhou said he was concerned about stock valuations. It also rose to a record after billionaire Li on May 17 said the market ``must be a bubble.''

`Keep Buying'

China's stock regulator last week ordered brokerages to make investors sign a declaration that they are aware of the risks when opening stock-trading accounts.

The nation's Ministry of Education warned university students to not get involved in stock trading, because they would be unable to bear the losses should their investments turn sour, the official Xinhua News Agency reported today.

Most students don't have stable incomes and are economically dependent on their parents for money, limiting their ability to cope with failed stock investments, the report said, citing ministry spokesman Wang Xuming.

The pace of gains on the stock market has added to speculation that the government will take measures to cool down the frenzy.

``Some investors simply keep buying shares, since there were no crackdown measures by regulators,'' said Fan at Guotai Asset Management.

Insurers Gain

Elsewhere, copper stocks rose after prices of the metal jumped by the daily limit in Shanghai today. Copper for August delivery on the Shanghai Futures Exchange rose as much as 3 percent to 63,650 yuan ($8,318) a metric ton in Shanghai.

Jiangxi Copper Co., China's largest listed producer of the metal, rose 1.48 yuan, or 6.1 percent, to 25.72. Anhui Tongdu Copper Stock Co., the second largest, climbed 1.l9 yuan, or 7.2 percent, to 17.68. Yunnan Copper Industry Co., the third largest, added 1.22 yuan, or 5 percent, to 25.69.

China Life Insurance Co., the nation's biggest insurer, gained 1.04 yuan, or 2.7 percent, to 40.07. Ping An Insurance (Group) Co., the second biggest, rose 2.23 yuan, or 3.6 percent, to 64.15.

Insurance companies have been approved in principal to invest in real estate in China, the Shanghai Securities News said on May 26, citing Zhou Daoxu, an official from the China Insurance Regulatory Commission. There are no policy restrictions regarding real estate investment by insurance companies, it said.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, gained 2.3 percent to 4277.06. The Shenzhen Composite Index, which covers the smaller one, added 2.8 percent to 1269.06.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

[HenryTo]

If anyone can pop it, it's probably either Buffett or Gates. These two were pioneers of the "new capitalism" during their times, and are both admired greatly in Hong Kong and China - more so than either Greenspan or Li Ka Shing. So far, of course, we haven't heard from either of them.

[rffrydr]

If the "richest man in China" couldn't do it. I don't htink my comrade Greenspan will make it stick. Couldn't make it stick here last month. Retail probably doesn't know who he even is.

We might get that "correction" however. But I'm still holding out for 4444 on the Shanghai composite.

We had a peek of this with Mauldin's feature on the PIMCO "Two Glasses" letter in which "Consultant" Greenspan was quoted for first time. I had a chance to watch a little CNBC today; his words were met with disdain, "I've seen fortunes lost on 'at some point.'"
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Today is the Tomorrow you worried about Yesterday!