Shanghai, above 5000

[S2007S]

I dont think there is such thing as buying the DIP on that stock exchange. UP 88% YTD.



SHANGHAI -- China's benchmark stock index topped 5000 for the first time, a milestone reflecting continued enthusiasm by individual investors but also highlighting the risks of a painful bust.

The Shanghai Composite Index ended at 5032.49, a gain in the session of 1.1%. The record close put the benchmark index about five times higher than it was in July 2005, when the market bottomed out at an eight-year low.

The index holds an 88% gain for the year so far, making it the world's best-performing major market.



http://online.wsj.com/article/SB118784931493006350.html?mod=googlenews_wsj

 

[Tums]

Their futures contract will go online later this year.





note: I hope they don't use the same computer as eCBOT.

 

[john12]

the amazing thing is as we've been obssessed with sub prime china's market has quietly run an astonishing 44% in 6 weeks. this index was 3600 at the beg of july.the index is up 3 1/2 fold since july 2006 or 13 months. its fallen 20% fast twice and come back within weeks. this puts 2000 naz to shame.thank god they don't have an etf or options on it as tons would be broke shorting it. because few can share in there's not as much focus on it

 

[S2007S]

Quote from john12:

the amazing thing is as we've been obssessed with sub prime china's market has quietly run an astonishing 44% in 6 weeks. this index was 3600 at the beg of july.the index is up 3 1/2 fold since july 2006 or 13 months. its fallen 20% fast twice and come back within weeks. this puts 2000 naz to shame.thank god they don't have an etf or options on it as tons would be broke shorting it. because few can share in there's not as much focus on it

Agree, the shanghai might run to 8,000, 9,000 or even 10,000 but when it does decide to take a step down a 50% drop is not out of question.

 

[Toro KMA]

I think its going to 8000. That would take it to the value of the Naz in Q1/00. Its a bubble.

You will make a lot of money shorting the FXI when the time is right.

 

[Cutten]

Quote from Toro KMA:

I think its going to 8000. That would take it to the value of the Naz in Q1/00. Its a bubble.

You will make a lot of money shorting the FXI when the time is right.

China is the world's #1 incipient bubble right now. Short-term it is very strong so you would (IMHO) be foolhardy to try to pick a top right now. The strength in the face of a massive emerging market selloff in the last month is a sign of very strong underlying demand for stocks on that market. I think it will go significantly higher before eventually bursting.

But when it finally tops out, boy oh boy people are going to see what a real crash looks like. The Chinese are going to get their own version of the dot.com crash, and with a less mature and diversified economy & financial sector, they are going to get pounded like one of Rearden Metal's proverbial rented gerbils. Expect to see bankruptcies amongst brokers, banks, investment firms etc.

Still, I think it is a way off yet. I think 7-8000 is the most likely top, although an outlier would be to reach just below 10,000. Certainly I would recommend loading up on back-month puts the moment it gets to 7000, then just keep buying the puts each 3 months until the collapse eventually happens.

One definition of mine for when to top-pick on a bubble, is where the market could fall 50% and still be overvalued. 7000-8000 would be that level, since 3500-4000 is definitely expensive on that index, in fundamental terms.

 

[john12]

what puts on china are you referring too? they have no puts or options on the china exchange. the closest thing is the fxi which has laged shanghia by 100% or more the past 13 months. the fxi is basically china stocks that trade in hong kong

 

[Cutten]

Quote from john12:

what puts on china are you referring too? they have no puts or options on the china exchange. the closest thing is the fxi which has laged shanghia by 100% or more the past 13 months. the fxi is basically china stocks that trade in hong kong

They're introducing a future, which I'm assuming will have tradeable options.

If it doesn't then yeah, it will be harder to trade a crash. In that case I would buy puts on a basket of foreign-listed China stocks which have the highest correlation with the domestic index. I've found that shorting futures during a bubble collapse is pretty tricky, unless you use an incredibly wide stop.

 

[lilboy716]

lol

there's no shorting in chinese stocks.

Quote from john12:

the amazing thing is as we've been obssessed with sub prime china's market has quietly run an astonishing 44% in 6 weeks. this index was 3600 at the beg of july.the index is up 3 1/2 fold since july 2006 or 13 months. its fallen 20% fast twice and come back within weeks. this puts 2000 naz to shame.thank god they don't have an etf or options on it as tons would be broke shorting it. because few can share in there's not as much focus on it

 

[S2007S]

proshares is coming out with some etfs covering the emerging markets, right now the only way to really catch a big gain on the downside is buying some DXESX, I think the proshares ETF will be just in time to catch all the downside in the emerging markets which are up over 400% in only 5 years. When the emerging markets finally enter bear markets expect a 30-60% drop in some of these over inflated indexes.