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The views expressed herein do not constitute research, investment advice, or trade recommendations and do not necessarily represent the views of all Coquest Advisors LLC or TEXPERS. Mark Shore is director of educational research at Conquest Advisors LLC in Dallas. He has more than 30 years of experience in substitute investments, publishes research, consults on alternative investments, and conducts educational workshops.
Shore is also an adjunct teacher at DePaul University’s Kellstadt Graduate School of Business in Chicago, where he educates a managed futures / global macro course. He could be a board member of the Arditti Center for Risk Management at DePaul University. Shore is a frequent speaker at alternate investment occasions.
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He is a adding writer for a number of global organizations like the Eurex Exchange, Cboe, Swiss Derivatives Review, reach, and Seeking Alpha. Before Conquest Advisors, he founded Shore Capital Research, a research/ consulting firm for alternate investments. Shore received his MBA from the University of Chicago and is currently a doctoral applicant.
I would suggest that you save your sympathy for further deserving causes, because as with the rest in markets, it depends upon your time and effort perspective. Opaque financials and poor corporate governance: While China has transferred to adopt international accounting criteria, Chinese companies are not doyens of disclosure, holding back key information from traders often.
Markets as morality plays: The nature of marketplaces is that each goes along and it is that unpredictability that helps to keep the total amount between traders and traders. In China, the response to along marketplaces is asymmetric. Up markets are treated as virtuous and traders who push up stock prices (often based on rumor and greased with leverage) are viewed as “good” investors.
Down marketplaces are seen as an affront to Chinese national interests and not only is there Draconian restrictions on bearish investors (limitations on short selling, trading stops) but investors who sell stock are called traitors, harmful market manipulators, or worse. Thus, the same Chinese government that sat on its hands as stock prices surged 60% from January to June has suddenly discovered the problems of volatility in the last couple of weeks as markets have given up a lot of that gain.
The bottom line is that the Chinese authorities neither understands nor trusts marketplaces, but it needs them and wants to control them. By restricting where investors can put their money, treating short sellers as market and criminals drops as calamities, the Chinese government has generated a monster, the first one that does not respond to its dictates perhaps.
The current attempt to stop the market collapse, including buying with sovereign funds, placing pressure on collection managers, name calling, and sloganeering might easily flourish in halting the bleeding, but the harm has been done. The best treatment for bias and ignorance is data and I made the decision that the first step in ridding myself of my China-phobia would be a look at how Chinese stocks and shares are being priced on the market today.
To make these comparisons, I used the market price data as of August 19, 2015, to estimate the market enterprise and capitalization beliefs. For the accounting data, I used the true numbers from the trailing 12 months, generally the year ending mid-year 2015, for some companies. I likened China with India, Russia, and Brazil, the three other countries which have been lumped collectively (awkwardly, in my view) as the BRIC, as well much like all of those other emerging marketplaces.
For evaluations, I also viewed the united states and the rest of the developed markets (where I included Japan, Western Europe, Australia, Canada, and New Zealand). Regardless of the drop in stock prices within the last few months, Chinese stocks are collectively more costly than stocks and shares anywhere else in the world. Chinese companies lag the rest of the global world, as it pertains to EBITDA and operating margins, but do much better than other emerging market companies on net margins.