Don't Mistake China's Stock Market For China's Economy

[Jlaw]

LOL.....

I cannot even begin to tell you HOW WRONG IS THIS STATEMENT.

Meanwhile, LOL

I can prove how wrong you are but not here to give a free education. Believe what u want.

 

[Providence]

LOL.....

I cannot even begin to tell you HOW WRONG IS THIS STATEMENT.

Meanwhile, LOL

The stock market is just a hyperventilated reflection of the real scenario of the economy. The troughs and lows are obviously not reflective but the overall trends are definitely in sync with the economy.

 

[jhungary]

Stock market value is not counted as part of the GDP calculation. For example, US stock market total value is 21.63 trillion USD. Its GDP, on the other hand, is only 16.77 trillion USD. This is because stock market exchange does not actually create any value where GDP stands for Gross Domestic Product.

Stock market value to GDP ratio is a less used indicator, mostly because it doesn't reflect much.

中美GDP构成比较，中国房地产业总收入只是制造业的5%_国际观察_天涯论坛

Stock market value is not total wealth either, especially neither infrastructure nor personal wealth. Part of personal saving of China is invested into stock market, but it is less than 5%. Rule of uneven wealth distribution also means out of the 5%, great majority is invested by wealthy individual rather than the common folk. This is, of course, on top of the fact that personal saving is a just one part of personal liquid assets, let alone the the entire personal wealth.

Infrastructure really has very little to do with stock market value. Part of infrastructure is fixed capital investment and part of them are simply national owned assets. In fact, infrastructure is pretty anti-thesis to stocks because infrastructure is typically fixed asset while stock market mainly deals with liquid asset.

Well, I can debate you til end of time how capital gain affect GDP, but I am choosing not to since I don't see I can change your mind, and so can't you.

 

[Providence]

Don't break their dreams man.

That said, this was a good wake up call for us, and especially the regulators.

Lucky this happened now, before our financial system has fully matured. So the damage is limited.

One thing you cannot deny sir is common people, the retail investors have lost heavy. It is always that section of the people who bears the brunt. The hedge funds and Institutional investors never lose money in real sense. That happens in US and it happens in China and everywhere else as well.

 

[jhungary]

I can prove how wrong you are but not here to give a free education. Believe what u want.

Do educate me, if you can.

The stock market is just a hyperventilated reflection of the real scenario of the economy. The troughs and lows are obviously not reflective but the overall trends are definitely in sync with the economy.

Indeed what you said is correct, you cannot look at how an economy perform by looking at the stock market, but the general investing mood can play a part in productivities level, both commercially and individually, but to say Stock Market is of NO CORRELATION to actual economy is a bit, stupid, as far as I can see.

 

[Providence]

Well, I can debate you til end of time how capital gain affect GDP, but I am choosing not to since I don't see I can change your mind, and so can't you.

I don't think he can understand the underlying economics of the arguments and just dish out some one liner rants..

Do educate me, if you can.



Indeed what you said is correct, you cannot look at how an economy perform by looking at the stock market, but the general investing mood can play a part in productivities level, both commercially and individually, but to say Stock Market is of NO CORRELATION to actual economy is a bit, stupid, as far as I can see.

Actually they both go hand in hand and there is no causality also you can associate. Eg. An index shock eg this margin lending phenomena could possibly have derailed the economy and if the economy is doing bad, obviously the majority of the companies won't be making in profits either and thereby the index drops. It works both ways.

 

[jhungary]

I don't think he can understand the underlying economics of the arguments and just dish out some one liner rants..

most of them can't......

And on another thread, I got a Chinese saying he cannot be racists as he is not of dominant power lol. Sometime I wonder what kind of education they went thru..

 

[ito]

The stock market has no correlation with the real economy.


Average Joes have been slaughtered in US markets in the past and continue to get slaughtered. Even hedge fund managers git slaughtered at some point in time. If people want to gamble it's their money

In mature stock markets 80% of investment is from FII...and no stock market is not gamble and neither is it for faint hearted.

Hedge fund managers are as sophisticated as an investor you could ever get. They are paid millions of dollars for investing on behalf of other people.

 

[jhungary]

Actually they both go hand in hand and there is no causality also you can associate. Eg. An index shock eg this margin lending phenomena could possibly have derailed the economy and if the economy is doing bad, obviously the majority of the companies won't be making in profits either and thereby the index drops. It works both ways.

Well, people invest in the market (not stock market) by looking at commodity indices and most trading done are going to be part of that reporting indexes, and with a higher stock market, the people are having a run on investment in a more favourable condition, also beside investing environment, in a general term, a higher stock market means a more capital gain of the market, and care to guess where those capital mostly ended up??

People don't understand is that, capital market or stock market control a part of economy and with that, it directly and indirectly affect productivities. For a very simple reason, most people are greedy, if I have money, I will want to invest those money into making more money, and with more capital gain, I can devote more resource into investing the market, of course, you can take your gain and go, but are people actually doing this now?

 

[tranquilium]

If an average Joe don't understand how to invest, he shouldn't be investing but should entrust that responsibility to a trained professional.

In mature stock markets the marginal investor is never a retail investor, but a financial institution. All investment decision are taken based on risk and return characteristics of a financial institution. If a retail investor wants to invest on his own, he should think like a financial institution.

There is nothing called periodic crash of stock markets. Stock market crash when expectations don't match realities.

Then, how do you explain the stock market cycle in US?

There are a lot of "should" or "shouldn't" in this world, but if everything goes by the logical step, then we wouldn't be in the world we are in today. The reality is, while individual customers constitutes of only small percentage of the stock market value in both China and US, they are very numerous and vast majority of the individual doesn't have the experience or expertise, but that doesn't really stop anyone. This is the real world we already live in.

Well, I can debate you til end of time how capital gain affect GDP, but I am choosing not to since I don't see I can change your mind, and so can't you.

I never touched capital gain. I am simply stating that stock market value isn't count as part of GDP, nor it is equivalent to personal wealth. Hence the statements:
"Stock Market contribute less than 40% of Chinese Economy (I think IIRC it is 37% of Chinese GDP last year, I could be wrong tho)" and "But still that hit would have made impact on Chinese Economy as a whole, as 30% of that 37% wealth just vanished" are incorrect.

 

[ito]

Then, how do you explain the stock market cycle in US?

There are a lot of "should" or "shouldn't" in this world, but if everything goes by the logical step, then we wouldn't be in the world we are in today. The reality is, while individual customers constitutes of only small percentage of the stock market value in both China and US, they are very numerous and vast majority of the individual doesn't have the experience or expertise, but that doesn't really stop anyone. This is the real world we already live in.

There is something called business cycles. When the business cycle is at trough, economy contracts...and that is reflected in stock market. Crashing of stock market is different from a stock market at trough of a business cycle.

As for the second part I already explained.

 

[Norwegian]

The stock market has no correlation with the real economy.

So US financial meltdown in stock market between 2007 - 2008 had zero effect on real-world economy?

 

[AndrewJin]

I just know we have lost worth 2 times of Indian stock market.
WE LOST 2 INDIA!

 

[Norwegian]

I just know we have lost worth 2 times of Indian stock market.
WE LOST 2 INDIA!

Losses in a financial market are virtual, although they do have real world ripple effects sometime later on...

 

[jhungary]

Then, how do you explain the stock market cycle in US?

There are a lot of "should" or "shouldn't" in this world, but if everything goes by the logical step, then we wouldn't be in the world we are in today. The reality is, while individual customers constitutes of only small percentage of the stock market value in both China and US, they are very numerous and vast majority of the individual doesn't have the experience or expertise, but that doesn't really stop anyone. This is the real world we already live in.



I never touched capital gain. I am simply stating that stock market value isn't count as part of GDP, nor it is equivalent to personal wealth. Hence the statements:

"Stock Market contribute less than 40% of Chinese Economy (I think IIRC it is 37% of Chinese GDP last year, I could be wrong tho)" and "But still that hit would have made impact on Chinese Economy as a whole, as 30% of that 37% wealth just vanished" are incorrect.

lol I should say "financial service contribute less than 40% of Chinese Economy"

I didn't realise I made that mistake until now, apologise for the confusion