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

[tranquilium]

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.

List of stock market crashes and bear markets - Wikipedia, the free encyclopedia

I must then be great coincidence that US would have a stock market crash every decade. While it is true that each crash is for its own unique, the common trend is still present because the stock market gradually build up in the stock price and eventually it reaches an unsustainable price and certain event will trigger a crash. The trigger may be different, but the underlaying pressure that allowed the trigger to work follows a trend, hence why it is periodic.

 

[AndrewJin]

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

It will have effect, but concerning China's case, not so big effects.
When Chinese economy good, Chinese stock market not good.
When Chinese economy bad, Chinese stock market can be good.
They are not relevant to some extent.
But I earned!
So I'll start my trip tomorrow, leaving for my paradise!

 

[Norwegian]

So I'll start my trip tomorrow/

Where to?

 

[tranquilium]

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

The third sector is not limited to financial service. In fact, financial industry is a rather small piece of the third sector. There is a reason it is called the service sector or tertiary industry instead of financial industry.

第三产业_百度百科
中国宏观经济数据_新浪财经_新浪网

The sina data is from 2012, but it is sufficiently recent that the composition didn't change much. In the 2012 data, the financial industry as a whole contributed to 2.32% of the Chinese GDP. So it is quite small, even comparing to other categories within the service sector.

 

[AndrewJin]

Where to?

Lijiang, for the fourth time.
Check my thread
My Adventures Across China | Page 7

 

[jhungary]

The third sector is not limited to financial service. In fact, financial industry is a rather small piece of the third sector. There is a reason it is called the service sector or tertiary industry instead of financial industry.

第三产业_百度百科
中国宏观经济数据_新浪财经_新浪网

The sina data is from 2012, but it is sufficiently recent that the composition didn't change much. In the 2012 data, the financial industry as a whole contributed to 2.32% of the Chinese GDP. So it is quite small, even comparing to other category within the service sector.

Dude, I did not say the third sector, while the service sector have about 46% of the Chinese GDP, I would not have said less than 40% if I am referring to service sector now, and I have already said I could be wrong, so what do you want from me?

 

[surya kiran]

Stock markets will have both investors and traders from a retail perspective.

Investors in the stock market should typically look at things from a longer term perspective. The same way, you would look at your own child. Bull runs will give way to bear run and then bull runs again. If you panic at every blip, being an individual investors will lose money. Why investors panic is because of what they believe is value erosion of the capital. Fall in value of investment is different from capital erosion. Let me explain. If you have invested 100$, this becomes 130$ and then falls to 115$ you should still be happy. Problem starts when 100$ becomes 95$. This arises mainly, because of late entry to the market.

To the people who think, stock markets do not have any repercussions. If a company is valued at 100 USD and it wants to raise money through loans, it can raise lets say 20 USD. If the value increases, it can raise more money and if value decreases it can raise less money. From an individual investor perspective, its the persons savings that are affected. Giving lessons on economics to a person who has lost money is of no use.

Stock markets are lead indicators. Why you may ask? Because the fight in the stock market is about people who have information and people who do not. People with information take a 'view' of the market. That information need not be available to everybody. So the person who wrote that article, needs to understand the basics. The people with information have taken a view, that there is a problem. The same people will, if measures are taken, have a different view 3 months down the line. So will they suddenly become smart? No.

Understand an underlying thing of the stock markets. The only smart guy, is the guy who is making money. Rest are suckers.

 

[Norwegian]

Lijiang, for the fourth time.
Check my thread
My Adventures Across China | Page 7
View attachment 236431

View attachment 236435 View attachment 236434 View attachment 236433

WOW. China is BEAUTIFUL!!!

 

[tranquilium]

Dude, I did not say the third sector, while the service sector have about 46% of the Chinese GDP, I would not have said less than 40% if I am referring to service sector now, and I have already said I could be wrong, so what do you want from me?

Just saying that 2.32% is pretty far away from "less than 40%".

The discussion started on the impact of stock market recession with the overall Chinese economy. If it is "less than 40%", then it would imply it is probably something between 30% to 40%. In that case, the recession would indeed have drastic effect on Chinese economy as whole. The reality, however, is that even financial sector as a whole doesn't actually accounts for much of Chinese GDP. In combination with the way Chinese A-share stock market is organized, simply means while there will be some impact, it is probably not much.

 

[ito]

List of stock market crashes and bear markets - Wikipedia, the free encyclopedia

I must then be great coincidence that US would have a stock market crash every decade. While it is true that each crash is for its own unique, the common trend is still present because the stock market gradually build up in the stock price and eventually it reaches an unsustainable price and certain event will trigger a crash. The trigger may be different, but the underlaying pressure that allowed the trigger to work follows a trend, hence why it is periodic.

Business cycles are predictable while stock market crashes are not. So you will never find a common trend or a periodicity in stock market. If some one can actually predict stock market index, he will become the world's first trillionaire.

 

[jhungary]

Just saying that 2.32% is pretty far away from "less than 40%".

The discussion started on the impact of stock market recession with the overall Chinese economy. If it is "less than 40%", then it would imply it is probably something between 30% to 40%. In that case, the recession would indeed have drastic effect on Chinese economy as whole. The reality, however, is that even financial sector as a whole doesn't actually accounts for much of Chinese GDP. In combination with the way Chinese A-share stock market is organized, simply means while there will be some impact, it is probably not much.

No, it's not 2.32%, I read somewhere between 10 to 20, but then again, I could be wrong

 

[tranquilium]

Business cycles are predictable while stock market crashes are not. So you will never find a common trend or a periodicity in stock market. If some one can actually predict stock market index, he will become the world's first trillionaire.

I never said it is predictable. My original post is intended to refute your opinion that "Exactly...this is what happens when people invest based on expectations than on real value of a company. International financial institutions bring in rationality to the stock markets. Absence of International financial institutions in Chinese stock markets left the market with no real checks and balances."

Because this is pretty much how US individual accounts works as well. In fact, it is pretty much how individuals work around the world.

No, it's not 2.32%, I read somewhere between 10 to 20, but then again, I could be wrong

I did link the pie chart. It is 2.32% in 2012 and GDP composition doesn't really change that quickly.

10% to 20% would imply between one tenth to one fifth of economic activity in China is financial service. That's hardly the composition of a large economy like China. Heck, Switzerland is typically thought as a country built around a giant bank, but in fact, financial sector only accounts for 11% of the Swiss GDP.

http://www.s-ge.com/sites/default/files/EN_USA_Investorenhandbuch_120514_2.pdf

Edit: You are not one of those people that believes China's GDP is hold up by real estate, are you? Because real estate sector is about the same size to the financial sector. Both are around 2% of the GDP.

 

[ito]

I never said it is predictable. My original post is intended to refute your opinion that "Exactly...this is what happens when people invest based on expectations than on real value of a company. International financial institutions bring in rationality to the stock markets. Absence of International financial institutions in Chinese stock markets left the market with no real checks and balances."

Because this is pretty much how US individual accounts works as well. In fact, it is pretty much how individuals work around the world.

You didn't refute anything. My point is the level of participation of International financial institutions is quite high in US markets as compared to Chinese markets. When large portion of traded stocks are with International financial institutions the chances of stocks fluctuating widely becomes low.

And yes, individual investors are all the same across the world.

 

[tranquilium]

You didn't refute anything. My point is the level of participation of International financial institutions is quite high in US markets as compared to Chinese markets. When large portion of traded stocks are with International financial institutions the chances of stocks fluctuating widely becomes low.

And yes, individual investors are all the same across the world.

Really? Because I am not sure about you, but this doesn't look to be "the chances of stocks fluctuating widely becomes low"

 

[大汉奸柳传志]

Stock Markets don‘t reflect sh!t. For the US it’s a hangover after 3 rounds Quantitative Easing，for China it‘s a gambling house where people bet on stocks like horses. Tho the international butthurt after the collapse is amusing