Hong Kong Bull market - will this time be different ?
While waiting for the mass mainlanders to come back and shore up the market even higher, I am taking a back seat to further analyse the HSI chart so that my enthusiasm/passion/greed does not get over me.
We can see from chart that in Oct 2022, there was the first bull run which rally for 56% before tumbling down for a good two years. Then, in Jan 2024, investors were beaming with hope once more when it rally for 34% but it was too short lived. It went down for the next 3 months.
Now, this is the 3rd bull market ,never mind the volume is much much higher than the first 2. The more important question is will it be sustainable?
This is my 2cents from reading , analysing the various English and Chinese media, articles and talking to investors. I have said before , the property market is the biggest investment for the common folks, rich or middle income in China. It has always been the go to asset for wealth creation and accumulation for generations. It constitutes close to 30% of its GDP.
Despite the bankruptcy of many listed property developers, over supplies of houses , aging population, low fertility, low youth employment rate, increasing unsatisfaction with the government policies, ongoing scams, etc , I believe the CCP will be cracking their heads every night to resolve this problem. They cannot allow the problem to fester and already in a deflationary environment, the worst is to follow the shoes of Japan where it went to a dark period of 3 decades of zombies..............
It is said that people are not willing to spend money in China, be it food, travel, luxury goods, stock market or buying houses. So these slew of QE stimulus , rescue package (never mind the term used) is really to target the property sector MORE than the stock market, imo.
The default rates of people not able to pay off their current mortgage is increasing. There are now more properties being foreclosed and put up for auction. These are not properties seized by banks when companies become bankrupt as we often watched in movies but the common folks who no longer can service their monthly payment. And worse, these auction properties are adding on to the supplies woes of the property market.
Of course, there would always be a group of people who are happy with the ultra low mortgage rate, low downpayment, etc and buy the properties. But on a scale like China, we nee to talk numbers, volume and that is not happening and that keeps the government awake at night !
What else is happening ? On the chinese social media, we are seeing an increase of legal and illegal lenders peddling for sales ? They are selling loans to these group of people enticing with low rates by the banks/"related services to banks".
By injecting money into the stock market via lending money to the companies who pledge their company shares with the government and do shares buyback, this makes the largest shareholders happy, CEO happy and naturally push up the share price , making the retail and institutional players happy. Win win win for all.
Rightfully, like US and Japan, when people feel rich from making "easy money" off the stock market, they would spend more - on food, entertainment, travel, etc. This confidence spike is what the government wants and thus the timing cannot be better , launching the bazooka right after the Fed cut rates. Now, the curtain is raised and the global audience are watching and the government must continue to unleash its round 2, 3, 4,etc stimulus to further stoke up the market. Yes, it would send its deficit up the roof which it already has, but they do not have another better option.
Letting the market falls further, letting the property prices to keep on going down, more developers closing shop , creating a vicious cycle of pessimism and low confidence is very dangerous for the government.
Soon, we will have the October Politburo meeting which I believe they will take this opportunity to unleash more good news. When that happens, we can expect the stock market to rally even further, creating the cycle of hope, optimism and spending the government wants..............
We can see from chart that in Oct 2022, there was the first bull run which rally for 56% before tumbling down for a good two years. Then, in Jan 2024, investors were beaming with hope once more when it rally for 34% but it was too short lived. It went down for the next 3 months.
Now, this is the 3rd bull market ,never mind the volume is much much higher than the first 2. The more important question is will it be sustainable?
This is my 2cents from reading , analysing the various English and Chinese media, articles and talking to investors. I have said before , the property market is the biggest investment for the common folks, rich or middle income in China. It has always been the go to asset for wealth creation and accumulation for generations. It constitutes close to 30% of its GDP.
Despite the bankruptcy of many listed property developers, over supplies of houses , aging population, low fertility, low youth employment rate, increasing unsatisfaction with the government policies, ongoing scams, etc , I believe the CCP will be cracking their heads every night to resolve this problem. They cannot allow the problem to fester and already in a deflationary environment, the worst is to follow the shoes of Japan where it went to a dark period of 3 decades of zombies..............
It is said that people are not willing to spend money in China, be it food, travel, luxury goods, stock market or buying houses. So these slew of QE stimulus , rescue package (never mind the term used) is really to target the property sector MORE than the stock market, imo.
The default rates of people not able to pay off their current mortgage is increasing. There are now more properties being foreclosed and put up for auction. These are not properties seized by banks when companies become bankrupt as we often watched in movies but the common folks who no longer can service their monthly payment. And worse, these auction properties are adding on to the supplies woes of the property market.
Of course, there would always be a group of people who are happy with the ultra low mortgage rate, low downpayment, etc and buy the properties. But on a scale like China, we nee to talk numbers, volume and that is not happening and that keeps the government awake at night !
What else is happening ? On the chinese social media, we are seeing an increase of legal and illegal lenders peddling for sales ? They are selling loans to these group of people enticing with low rates by the banks/"related services to banks".
By injecting money into the stock market via lending money to the companies who pledge their company shares with the government and do shares buyback, this makes the largest shareholders happy, CEO happy and naturally push up the share price , making the retail and institutional players happy. Win win win for all.
Rightfully, like US and Japan, when people feel rich from making "easy money" off the stock market, they would spend more - on food, entertainment, travel, etc. This confidence spike is what the government wants and thus the timing cannot be better , launching the bazooka right after the Fed cut rates. Now, the curtain is raised and the global audience are watching and the government must continue to unleash its round 2, 3, 4,etc stimulus to further stoke up the market. Yes, it would send its deficit up the roof which it already has, but they do not have another better option.
Letting the market falls further, letting the property prices to keep on going down, more developers closing shop , creating a vicious cycle of pessimism and low confidence is very dangerous for the government.
Soon, we will have the October Politburo meeting which I believe they will take this opportunity to unleash more good news. When that happens, we can expect the stock market to rally even further, creating the cycle of hope, optimism and spending the government wants..............
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