China’s stock market has been the talk of investors, along with Greece, for the best part of 2015. The rapid rally that began midway through last year, something that saw the benchmark Shanghai Composite rally more than 150% in just 9 months, fascinated markets.
Then in mid-June the rally stopped and was savaged, losing more than 30% in just a few short weeks.
Not only has it captured the imagination of investors, it also raised serious concerns about the trajectory the market was on as well as the broader Chinese economy.
Encouraged by the government, inexperienced investors poured into stocks, some using leverage, like a mob who had just been provided with the winning Lotto numbers a day early. Pushing aside fundamentals, it was not a case of whether you should buy, but simply how much.
That raised more than a few eyebrows, particularly from seasoned investors who’ve seen similar bubbles come and go in China and elsewhere.
This sentiment is no better expressed than in a recent Bloomberg article where three well-known asset managers – Paul Singer from Elliott Management, Bill Ackman from Pershing Square Capital Management and Jeffrey Gundlach of DoubleLine Capital – reflect the concerns many have expressed when it comes to China’s bubbly stock market.
Speaking at the CNBC Institutional Investor Delivering Alpha Conference in New York, Singer told the audience that a potential debt-fuelled stock market crash in China “may be way bigger than subprime”.
Ackman, speaking at the same conference, suggested that compared to Greece, China “is a bigger global threat by far”, adding “if you look at the Chinese financial system, you look at shadow banking, you look at the amount of leverage, you look at how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the US”.
Indeed, that sentiment was echoed was Jeffrey Gundlach who, in an interview with CNBC that coincided with the conference, noted that “China is really kind of concerning”, suggesting the nation’s stock market is “far too volatile and murky to invest in.”
These are not just ordinary investors – they manage tens of billions of dollars between them – and they’re unconvinced of the merits of investing in China’s markets.
Many may disagree, and they may end up being wrong, but who would you rather listen to for financial advice? Guys with some serious skin the game or a state-run Chinese media outlet?
You can read more here.