Wednesday, January 31, 2007

Chinese equities exchanges go into overdrive

Wall Street Journal, reported on Dealbreaker.com's Opening Bell
Stock Frenzy In China Stokes Official Concern (WSJ)Several months ago, then Treasury Secretary Snow went to China and told anyone who would listen that the Chinese people had to embrace the concept of household debt. Take out a few credit cards, he exclaimed, and while you're at it, buy a few American-made goods, just to help balance out the trade deficit. Well, the Chinese seem to be getting the whole debt thing, but they're not buying American Apparel t-shirts. Instead they're snapping up stock in the Chinese market, helping to fuel a rally, but also helping to make the whole thing look like a house of cards that will come tumbling down at the first mention of wind. So they're taking out second mortgages, setting up online trading accounts and maxing out the AmEx to play their hand at what looks to be a hot deck. Thanks a lot John Snow!

This appears to be the Law of Unintended Consequences showing up again. Not necessarily in the amero-centric picture that Dealbreaker's Joe Weisenthal paints, but as a consequence of China's exploding prosperity combined with the Chinese cultural passion for gambling, and a deeply ingrained belief in luck and good fortune. It looks like high tide for trading firms doing business in China. Hint: don't be the one holding the bag when the margin calls come it.

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1 comment:

Lee_D said...

It's no coincidence, but Jeff Matthews has some good points on this very subject here:

http://jeffmatthewsisnotmakingthisup.blogspot.com/2007/01/we-all-know-how-this-story-ends.html