Get Rich From Chinese Stock Market Crash?

Discussion in 'General Trading Discussion' started by Rainman, Jul 13, 2015.

  1. Rainman

    Rainman Senior Investor

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    I've seen and actually read a few articles written by investing "experts" who believe that this is the right to buy Chinese stocks. It could appear like a great risk but the pay-off according to them could be well worth it when the market recovers. Unfortunately though no one knows how long it would take for the market to recover. Do you, investors, think this is sound advice?
     
  2. Penny

    Penny Well-Known Member

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    If, as predicted, China starts allowing citizens to buy foreign stocks then many Chinese company stocks may never recover to the levels they had when Chinese citizens were a captive market. For this reason I would suggest being cautious and avoiding the stocks most likely to be overvalued by Chinese people for cultural reasons, predominantly real estate.
     
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    The government over there is way too involved in things. I'd be very, very careful and put very little (if anything) into Chinese companies right now.
     
  4. Corzhens

    Corzhens Senior Investor

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    Why would we buy Chinese stocks? It is a communist country and you don't know what lies ahead. From what I know, unlike democratic countries, China can issue edicts without the benefit of public consultation. That means there is no stability in anything. What if the government would declare a stock to be of no value? Our investment would just go down the drain. And the value of those stocks would get back up when the economy stabilizes. And what if it doesn't? Pardon me for being a devil's advocate, just trying to extract more info.
     
  5. ScooterBrandon

    ScooterBrandon Senior Investor

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    As always both JR and Corz are the voices of reason.
    Too much funny business going on in China for my tastes as well.
    Plus I have no idea whats actually going on, perhaps if I had some good contacts in China that I trusted I might play it a little different.
     
  6. Beary

    Beary Member

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    Sounds like a gamble to me. I prefer safer investments with less volatility. Like the others said, the government has too much control over the market.
     
  7. JR Ewing

    JR Ewing Super Moderator Staff Member

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    There's also the contrasting lack of oversight and quality controls in general in addition to the government issue.

    I learned this the hard way with CNEP - I lost several thousand dollars there when it was discovered that they were cooking the books and they filed BK. Luckily it happened before I could up my investment from $3k to $30k like I'd planned to do eventually.
     
  8. Corzhens

    Corzhens Senior Investor

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    Thank you very much for the compliment. I am just voicing out my opinion based on what I see and hear.

    We were in Beijing, China last January and I saw for myself the meekness of the business people there. As what the hotel concierge had intimated to us, the business atmosphere is dictated by the government. However, she added that their economy is quite stable that's why the public has no complaints when it comes to business policies being implemented.
     
  9. petesede

    petesede Guest

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    yeah, I would never invest in Chinese companies directly, there is simply way to much manipulation by the government and they have a very short, and thus knee-jerk reaction to everything. They way they manipulated margin rates and requirements a couple years ago is insane. The crash that occurred the last few months was basically the same thing that happens in a short squeeze. So many investors there were margined to 90% and as soon as there was a down-tick, it forced a sell-off because of margin calls, and that sell-off caused even more people to have problems with their margin levels..

    I still look at China now the same way Japan was in the late 70s to mid 80s or the USA in the 1920s. They have competitive advantages because of low labor costs that isn´t going to last as a middle class develops and becomes demanding.

    The best play in China is to buy US companies that are exploiting low wages over there.... such as Apple.
     
  10. Onionman

    Onionman Senior Investor

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    The market is liberalizing and at some point it won't be a closed market to the global investment community but it's still a difficult market to play. I bought an ETF back in 2007-08 and it wasn't until earlier this year was I back in the money after it crashed back then. I managed to sell half of it just before the recent big correction and I may end up sitting on the rest for another seven years.
     

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