May

31

China, from Sushil Kedia

May 31, 2007 |

 China stocks advance, rebounding from a $161 billion rout:

Bloomberg.com reports China's stocks rose, rebounding from a rout that yesterday wiped out $161 billion of market value. The CSI 300 Index gained 41.49, or 1.1%, to 3927.95 at the close, having earlier lost as much as 5.2%. It yesterday plunged 6.8%, the most since Feb. 27, after the finance ministry tripled the tax on share trades to cool a rally was drawing more than 300,000 new investors a day. "The government definitely doesn't want to see a big correction,'' said Howard Wang, who helps manage JF Asset Management's $443 mln JF China Pioneer A-Share Fund in Hong Kong. "What it wants is for local investors to think of returns as more symmetrical than they have been. If the market comes off 20 percent, then you're looking at a social issue.''

From government-administered resource markets in the USSR to government-administered financial markets is truly not much of a leap. Power corrupts and absolute power corrupts absolutely, said an illustrious British Prime Minister. It applies well today.

This reminds me of when the Hong Kong market went on to create its peak in the first half of the 90s and then the government was on the defending end of a hedge funds' selling blitzkrieg. Eventually the government came out a winner, having made enormous profits, but not before the market capitalization was cindered.

If such a thing plays out in China, which is unlikely given the cautious administration, it would be by some other handle the mistress would inevitably pull. As was true the last time it happened in Hong Kong, men with canes will be hobbling yet again in the financial marts of Shanghai.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search