WSJ does about-face on China market

We know it’s a bit immodest to pat ourselves on the back for being ahead of the pack, but when the Wall Street Journal totally reverses itself to our way of thinking, we think someone has to mention it.

In the midst of the Chinese stock market rout last week, as the government instituted measures to stop the slide, the Wall Street Journal said, “The moves only heightened what is turning into an epidemic of anxiety among Chinese investors and a crisis of confidence in their leaders.”

“The more the government intervenes, the more scared I am,” Li Jun, who runs a fishing and restaurant business in the eastern city of Nanjing, told WSJ.

Then on Monday, after a three-day bounce, we open the Journal to read, “Many global investors are hanging on to China’s stock-market roller coaster. … While Chinese mom-and-pop investors have dumped shares en masse, big institutional investors based in the U.S. have been more sanguine. The reason: Even as China slows, its economic growth continues to outpace the rest of the world.”

Janus

Isn’t this what Asia Unhedged has been saying all along?

The Journal said “the recent selloff has also brought overall Chinese stock valuations down to what portfolio managers consider to be more reasonable levels. … Although many say it is still too early to go bargain hunting, fund managers are eyeing stocks that stand to benefit from the rise of China’s middle class and consumer spending.”

Didn’t Asia Unhedged say Hong Kong stocks were compelling buys?

The Shanghai Stock Exchange Composite Index rose 2.4% to 3,907 on Monday. It’s now up 13.2% from Wednesday’s bottom. The Shenzhen Stock Exchange Composite Index leapt 4.2% to 2120 and the small-cap barometer, the Chinext Price Index jumped 5.8% to 2,683.

Do we have your attention now?

We now expect the SHCOMP to recover into the 4,000-4,200 range this week given the government’s determination to save the market. Selling pressure on the Shanghai-Hong Kong Connect faded into last week’s close. With liquidity coming back to the market, once the SHCOMP crosses 4,000, net capital flows will turn positive again. On top of that, we expect China’s gross domestic product in the second quarter to come in at 7% again.

One of the US market’s oldest saws is “Don’t fight the Fed(eral Reserve Bank).” We want to apply this to China’s central bank: Don’t fight the People’s Bank of China. Even if the government has been unsophisticated and heavy handed in its handling of the market, the risk-reward of going against the nearly unlimited ammunition supplied by the PBOC to state funds is truly not worth the candle. This makes the ongoing bounce very real and durable. The conventional wisdom of selling into a bear market rally won’t pan out.



Categories: Asia Unhedged, China

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  • panasian

    I have been following Asia Times for many years. I think you guys are the best, specially when it comes to analyzing China, because unlike very biased-Western media , Asia Times has been very even-handed. In my opinion, your analysis of Chinese economy and stock market is a lot better than that of Wall Street Journal or even The Economist. Keep up the good work !!!!

  • Alex Wijaya

    meh, US journalism today handled by students who graduated from journalism with GPA of 2.5

  • d.g.summers

    Hahaha! Ahahaha! Keep up the good work!!! Hahaha!!

  • panasian

    Ha ha ha, keep laughing , LOL !!!!

  • ted

    USSA Journalism is controlled by the USSA Police State Government.Wall Street in it for the Big Guy and not the little ones.Just like the Major Banks like JP Morgan Stanley Chase,Citicorp Bank,Bank America,and other Major Banks getting away with Money Laundering for the Cartels and Terrorist.To name a few.Not one ever convicted of there crimes.But then again.WSJ is pretty much controlled like the WEST Propaganda Mainstream Media News.Asia Times is not controlled like the West Media.I have been a reader Asia Times for years.They’re reporting many things of East that many sheeple fools in West are unaware or don’t believe.Honestly,they think are doing so well that they don’t want to find the truth themselves.They only read,listen,hear the crap the West Propaganda Media Outlets put out.They want to control the Masses in the West.So far.they are doing a good job.The controls are in place.There a some of us who find truth somewhere else.Like Asia Times.

    There have been some whistleblowers to come out that Wall Street stated ,”Wall Street is nothing but a Big Ponzi Scheme” or “3 Card Monty”.Then,again most your readers already knew that.Compared to the idiots in USSA that the Wall Street and rest of West Propaganda Mainstream Media News helps the little guy.They are all fools.

  • Qiaobao

    Sounds like cannibalism, but reporters are just as much part of the real world as politicians, terrorists, and movie stars. So why cannot media (A-Times) report on media (WSJ)? Doctors best check other doctors, lawyers other lawyers, so why not journalists other journalists?