12/17/2012

China’s stock markets are safe


While many countries have adopted the American model of financial system and stock market operations, China is still very conservative and guarded. It is very careful in how its stock markets and financial systems are operating and opening up gradually without exposing them to the high risks of American model markets.

Among the key features are no derivative tradings, no hedge funds, no computer or high frequency tradings. It even restricts the amount foreign funds are allowed to invest in Chinese stock markets. And it carefully chooses the type of foreign funds to invest in its markets, and preference is given to sovereign wealth funds and pension funds but NOT to hedge funds. Some may think that this will restrict its growth and the liquidity in its markets. But China is not the least worry and not in a hurry. It is not blindly greedy for foreign funds and willingly opening its legs widely to be screwed, or allowed the foreign funds a free hand to run circus and exploit/rob the innocent investors of their hard earned money. It must know that the foreign funds, particularly the hedge funds and computer/HFT operators are not there to do charity but to make money, plenty of money, to take advantage of the system, with no qualms or worries about ethics and moral goodness or the well being of the investors and the stock market.

The funds that are permitted to invest in Chinese markets are Qatar Investment Authority, Temasek Holdings, GIC, Norway’s Norges Bank and Abu Dhabi Investment Authority. Even then, the amount they could invest in China is restricted to about US$1b each. Qatar has a limit of US$5b. China is looking for long term investors and not speculators and gamblers and would not allow big funds to create havoc by controlling the market with their large war chests.

Some may be sneering that the Chinese markets are unsophisticated and will not grow at the speed of western modelled markets, but what is likely to happen is that the Chinese markets would still be around when the western modelled markets failed as a result of its casino nature, fraudulent systems and products. China must be very prudent and not to be conned by the big funds and their criminal practices like computer trading, HFT and derivatives to destroy its markets.

The days of western modelled markets are numbered and will fail disastrously.

7 comments:

patriot said...

The Chinese must not modernize itself the ways the American and Europeans did and do. That is; do lots of paper trades and spend on credits lavishly.
Traditional Chinese are hardworking, frugal and down to earth. And these Chinese traits have kept them going and growing for more than five thousand years gathering strength going ahead.
The Chinese got to stay to their cultural values.

Anonymous said...

The Chinese should not ruin their stock market like Singapore.

Matilah_Singapura said...

@patriot

>> Traditional Chinese

Good luck with that. That world is increasingly run by younger Chinese, and after observing this "new breed" from HK, Beijing etc. I can tell you they are not "traditional" by any stretch. They still work hard and love making money, but I'd their attitude and manner of thinking is LIGHT YEARS away from say, my grandfather's time -- the real "traditional" time.

Matilah_Singapura said...

If there is money to be made doing something, you can rest assured something will happen.

China is modernizing. There is no stopping them. That economy is going to grow like a motherfucker, and capital markets are necessary or no growth will happen. Like everyone else, their capital markets will change and improve to meet demand.

Like I said, if there's a buck to be made....

Anonymous said...

Every society evolves
but that does not mean if
your neighbours fuck around
You have to follow.
Should your offsprings follow
the neighbours instead of You,
the Father, then blame not your
neighbours but his poor upbrining.

Chua Chin Leng aka redbean said...

Just hope they are wise enough not to turn their market into one like the SGX. So far they are doing all the right things. No hurry, don't try to be greedy, don't think bringing in the foreign funds are good without control. Not to allow funds to hook their computers into their stock market computers.

And don't they be blinded by the snake oil salesmen and allow derivatives to play a big part in their financial market.

Everything must be treated with great caution. Take it a step at a time, grow organically and don't be tempted by drugs ie injection of foreign liquidity in a mad way.

The big foreign funds are not there to help the market.

Anonymous said...

It is easy for China to pick up bad habits. It was opium then and it is credit now. Be very careful with China accounting rules, they are very different from what we are used to. In additional, the internal and external unrest, the corruption, the one party rule, the abundance land of the east may sound too good to be true.