China Focus : Never Underestimate A Market That Overestimates Itself

Our heart goes out to the 396 victims of the Yangtze ferry disaster as we pray for the missing persons on Mount Kinabalu.

The latest victim of the debt default market is duck processing company, Zhong’ao Holdings Group which is a largely profitable operation succumbing to withheld credit lines. Poultry is not in favour as KFC comes out to sue on 8 legged chooks rumours spread by rivals (presumably). [found a grotesque video on Youtube]

A ship builder, Sainty Marine, is also accumulating some overdue debt despite being listed in the best performing stock index of the world in 2015 – the Shenzhen Composite Index which is up 115.66% year to date and up 189 % in the last 12 months.

My view has not changed from last week :

One must never underestimate China is the lesson of the week and the chart of the week is, without dispute, the Crash Boom Bang chart of the Shcomp on Thursday for it to close the week on a 7 year high, above the 5,000 dream level.


Never underestimate that stock markets in China are unrelated to the economy as Bloomberg has come out to show.


Because shares of the 144 firms that IPO this year have averaged 539% returns !

At least 80 Chinese companies have changed their names in the first 5 months of this year. “A composite floorboards manufacturer switched to online gaming and changed its name; A hotel group rebranded itself as a high-speed rail company; A fireworks maker as a peer-to-peer lender and; A ceramics specialist as a clean-energy group.”

Even Singapore’s SGX came out to chastise Singapore listed Chinese company YuuZoo for misusing the exchange to publish positive (biased) information on itself.

I reserve my opinion on all that because the truth will come to light and there is no need to beat our chests just because we missed out on the rally this week and I am willing to bet that half the China critics will be queuing to buy stocks the minute we get a 10% correction to catch the falling knife ?

My opinion on CNH bonds is another matter because CNH bonds are among the top performers in Asia year to date even if they are unable to beat Switzerland (10Y -0.23%), Bulgaria (10Y -0.15%) and Latvia (10Y -0.46%).

CNH bonds remain tops as far as volatility is concerned, giving investors “and a sleep full of sweet dreams, and health, and quiet breathing”, to quote Keats.

With that, we can go back to sleep unless you feel like some SHCOMP next week.

Leaving with the indicative prices.