Chinese Stocks during the COVID-19 Pandemic

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Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sun Mar 08, 2020 5:26 am

In a recent thread, we looked at several historical pandemics and their impact on the U.S. stock market. There was generally a consistent pattern in all of these, where the outbreak lasted up to about a year, with modest stock market selloffs in the 10%-12% range, and usually a fairly rapid V-shaped recovery.

Several posters kindly objected that past pandemics are not a reliable guide to modern outbreaks, as the world has now changed, becoming more interconnected and interdependent. While agreeing with this view, we also now have current data from China, where we can see a pandemic and its stock market impacts in almost real time (charts below):
Interestingly, the pattern in China over the past two months is nearly identical to the historical pattern seen in past U.S. pandemics. Once the number of daily coronavirus cases started to climb, both of China's stock markets quickly sold off about 10%-12%. But soon, once the scope of the pandemic was better known and mitigation steps were underway, stocks started a V-shaped recovery, regaining their former levels within a few weeks.

This is NOT to suggest that the U.S. market will behave the same way in the months ahead — who knows what's to come for U.S. stocks. But the history of pandemics does indicate their market impacts are very often mild and temporary.

Thoughts?
Last edited by SimpleGift on Sun Mar 08, 2020 8:22 am, edited 1 time in total.

Seasonal
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Sun Mar 08, 2020 5:37 am

Interesting and nice to know that past data is positive.

Two usual questions regarding historic data: do we have enough of it to be significant and are the conditions that generated it sufficiently similar to today that they should be applicable. Even then, the future might be different due to randomness or due to traders already having incorporated past performance into their expectations and pricing.

In this case, China's ability to control the spread of the virus and the government's influence over the stock market may be quite different from the situation in the US, which could result in a quite different outcome. Or not. It will be interesting to see what happens with Italy, which is implementing a large scale lockdown.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sun Mar 08, 2020 8:50 am

Seasonal wrote:
Sun Mar 08, 2020 5:37 am
In this case, China's ability to control the spread of the virus...may be quite different from the situation in the US, which could result in a quite different outcome.
Yes, this is a key point and it will be interesting to watch as the situation unfolds — especially if the number of coronavirus cases does start to rise again in China. In past pandemics (e,g., the 1918 Spanish flu), apparently the virus came and went in waves of infection, dying down in summertime but then reappearing the following fall. Let's hope this doesn't repeat.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Sun Mar 08, 2020 9:00 am

It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by columbia » Sun Mar 08, 2020 9:09 am

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
The Chinese government seems to be massively manipulating its stock market.
Imagine that. ;)
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sun Mar 08, 2020 9:14 am

Not aware of any government interventions in the markets, other than the standard monetary and fiscal measures that many other economies, including the U.S., are now taking:
MoneyWeb on 3/6/20 wrote:The swift response from the Communist Party to arrest the spread of the deadly disease helped restore confidence as the number of new infections outside of the worst-hit province of Hubei drop. A succession of policy-easing measures ensured liquidity was ample in markets, with a measure of interbank borrowing costs tumbling to its lowest level in almost a decade. Another impetus for the rally: the prospect of massive fiscal stimulus similar to that unleashed in the wake of the global financial crisis.
Last edited by SimpleGift on Sun Mar 08, 2020 9:22 am, edited 1 time in total.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Tdubs » Sun Mar 08, 2020 9:17 am

So all we gotta do is be just like the Chinese government and everything will work out fine. I feel much better.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Sun Mar 08, 2020 9:34 am

SimpleGift wrote:
Sun Mar 08, 2020 9:14 am
Not aware of any government interventions in the markets, other than the standard monetary and fiscal measures that many other economies, including the U.S., are now taking:
MoneyWeb on 3/6/20 wrote:The swift response from the Communist Party to arrest the spread of the deadly disease helped restore confidence as the number of new infections outside of the worst-hit province of Hubei drop. A succession of policy-easing measures ensured liquidity was ample in markets, with a measure of interbank borrowing costs tumbling to its lowest level in almost a decade. Another impetus for the rally: the prospect of massive fiscal stimulus similar to that unleashed in the wake of the global financial crisis.
One has to think that China's swift response on the ground to control the virus has helped their markets.
It was surely the right thing to do from a humanitarian standpoint, but this has clearly caused massive long-term damage to their economy.The risk of over-reliance on Chinese supply chains has now been exposed. That this is not reflected in Chines stock prices suggests to me that something is clearly off. I tend to think that the "head in the sand" mentality is true of the US stock market even as yet, but the full extent remains to be seen.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Livelife2fullest » Sun Mar 08, 2020 9:42 am

Chart makes me want to stay far away from international equities right now. I don’t think the Chinese markets have priced the unknown economic impact in yet.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by willthrill81 » Sun Mar 08, 2020 9:56 am

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:34 am
SimpleGift wrote:
Sun Mar 08, 2020 9:14 am
Not aware of any government interventions in the markets, other than the standard monetary and fiscal measures that many other economies, including the U.S., are now taking:
MoneyWeb on 3/6/20 wrote:The swift response from the Communist Party to arrest the spread of the deadly disease helped restore confidence as the number of new infections outside of the worst-hit province of Hubei drop. A succession of policy-easing measures ensured liquidity was ample in markets, with a measure of interbank borrowing costs tumbling to its lowest level in almost a decade. Another impetus for the rally: the prospect of massive fiscal stimulus similar to that unleashed in the wake of the global financial crisis.
One has to think that China's swift response on the ground to control the virus has helped their markets.
It was surely the right thing to do from a humanitarian standpoint, but this has clearly caused massive long-term damage to their economy.The risk of over-reliance on Chinese supply chains has now been exposed. That this is not reflected in Chines stock prices suggests to me that something is clearly off. I tend to think that the "head in the sand" mentality is true of the US stock market even as yet, but the full extent remains to be seen.
I think that the jury may still be out as to how much of a long-term impact this will have on China. If they can get their factories back up and running in the next couple of months, then I suspect that most U.S. firms will not switch to suppliers in other nations. But if they are unable to get back on track in that time frame, this may be different. Chinese officials certainly realized this, which is why they have pushed so hard to get their operations back underway. It's a calculated risk though, since this requires reducing/eliminating quarantine measures and may result in the virus spreading faster than otherwise.

In many ways, I think that the next couple of months will be very telling, more so for what happens to China than what happens to the rest of the world.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by HEDGEFUNDIE » Sun Mar 08, 2020 10:01 am

columbia wrote:
Sun Mar 08, 2020 9:09 am
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
The Chinese government seems to be massively manipulating its stock market.
Imagine that. ;)
Yes imagine a government taking emergency monetary and fiscal measures to prevent an economic collapse. How ridiculous and un-American.

;)

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by columbia » Sun Mar 08, 2020 10:15 am

HEDGEFUNDIE wrote:
Sun Mar 08, 2020 10:01 am
columbia wrote:
Sun Mar 08, 2020 9:09 am
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
The Chinese government seems to be massively manipulating its stock market.
Imagine that. ;)
Yes imagine a government taking emergency monetary and fiscal measures to prevent an economic collapse. How ridiculous and un-American.

;)

The point being: relying on the idea that the economic and market impact won’t be as bad as some think, based on China propping up their markets is off the mark. This could be ugly in the US.
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by HEDGEFUNDIE » Sun Mar 08, 2020 10:29 am

columbia wrote:
Sun Mar 08, 2020 10:15 am
HEDGEFUNDIE wrote:
Sun Mar 08, 2020 10:01 am
columbia wrote:
Sun Mar 08, 2020 9:09 am
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
The Chinese government seems to be massively manipulating its stock market.
Imagine that. ;)
Yes imagine a government taking emergency monetary and fiscal measures to prevent an economic collapse. How ridiculous and un-American.

;)

The point being: relying on the idea that the economic and market impact won’t be as bad as some think, based on China propping up their markets is off the mark. This could be ugly in the US.
All the more reason to diversify.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sun Mar 08, 2020 10:33 am

columbia wrote:
Sun Mar 08, 2020 10:15 am
The point being: relying on the idea that the economic and market impact won’t be as bad as some think, based on China propping up their markets is off the mark. This could be ugly in the US.
Not sure we need to resort to unsupported theories about China propping up their markets during this pandemic, via some unreported shadow interventions.

The behavior of their stock market in response to this COVID-19 pandemic exactly fits the pattern that we've seen in the U.S. market with past outbreaks in history — from the 1918 Spanish flu pandemic (see here), the 1957 Asian flu pandemic (see here), and the 2003 global SARS outbreak (see here). Quick selloffs of 10%-12%, then gradual V-shaped or U-shaped recoveries.

In short, there's ample historical evidence that the impact of past pandemics on major stock markets has been fairly mild. The U.S. may prove to be entirely different in this case, but it would be going against historical precedent.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Sun Mar 08, 2020 12:10 pm

SimpleGift wrote:
Sun Mar 08, 2020 10:33 am
columbia wrote:
Sun Mar 08, 2020 10:15 am
The point being: relying on the idea that the economic and market impact won’t be as bad as some think, based on China propping up their markets is off the mark. This could be ugly in the US.
Not sure we need to resort to unsupported theories about China propping up their markets during this pandemic, via some unreported shadow interventions.

The behavior of their stock market in response to this COVID-19 pandemic exactly fits the pattern that we've seen in the U.S. market with past outbreaks in history — from the 1918 Spanish flu pandemic (see here), the 1957 Asian flu pandemic (see here), and the 2003 global SARS outbreak (see here). Quick selloffs of 10%-12%, then gradual V-shaped or U-shaped recoveries.

In short, there's ample historical evidence that the impact of past pandemics on major stock markets has been fairly mild. The U.S. may prove to be entirely different in this case, but it would be going against historical precedent.
Have there been any pandemics since 1900 that involved locking down such high percentages of a country's population and productive capacity? Have any taken place in a service-dominated economy such as ours? Not to my (admittedly limited) knowledge. I think we are in uncharted territory.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Third Son » Sun Mar 08, 2020 12:26 pm

First thing China needs to do is get the wet markets out of their economy.
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by physixfan » Sun Mar 08, 2020 1:30 pm

IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme policies to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
Last edited by physixfan on Sun Mar 08, 2020 4:19 pm, edited 1 time in total.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by aristotelian » Sun Mar 08, 2020 3:45 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
Does the Chinese government manipulate the price of VWO? They are good but I don't see them being that good.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by DB2 » Sun Mar 08, 2020 4:06 pm

physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
Agreed. The virus seems to have peaked in China there is confidence in gov't quarantines. For market timers and traders, it might be a good time to buy.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by bitdocmd » Sun Mar 08, 2020 4:10 pm

physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
This is missing the point. The Chinese stock market is not free and fair in any way. The Chinese are not allowed to sell.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by HEDGEFUNDIE » Sun Mar 08, 2020 4:11 pm

bitdocmd wrote:
Sun Mar 08, 2020 4:10 pm
physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
This is missing the point. The Chinese stock market is not free and fair in any way. The Chinese are not allowed to sell.
Would love to see evidence of your assertion.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by physixfan » Sun Mar 08, 2020 4:22 pm

bitdocmd wrote:
Sun Mar 08, 2020 4:10 pm
physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
This is missing the point. The Chinese stock market is not free and fair in any way. The Chinese are not allowed to sell.
The Chinese are allowed to sell. The Chinese are just not allowed to short.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Corsair » Sun Mar 08, 2020 4:55 pm

Worst PMI on record. Car sales down 80-90%. Metro traffic down 90%.

Stocks up :mrgreen:

How the invisible hand of the state works in Chinese stocks
https://www.ft.com/content/0d41cb6e-471 ... 5839e06441
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by physixfan » Sun Mar 08, 2020 5:19 pm

Corsair wrote:
Sun Mar 08, 2020 4:55 pm
Worst PMI on record. Car sales down 80-90%. Metro traffic down 90%.

Stocks up :mrgreen:

How the invisible hand of the state works in Chinese stocks
https://www.ft.com/content/0d41cb6e-471 ... 5839e06441
The stock market is pricing in a 100% chance of recovery, that's why it's up and I don't think it is very unreasonable if you think about long term investment return.
Last edited by physixfan on Sun Mar 08, 2020 5:49 pm, edited 1 time in total.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by HEDGEFUNDIE » Sun Mar 08, 2020 5:24 pm

Corsair wrote:
Sun Mar 08, 2020 4:55 pm
Worst PMI on record. Car sales down 80-90%. Metro traffic down 90%.

Stocks up :mrgreen:

How the invisible hand of the state works in Chinese stocks
https://www.ft.com/content/0d41cb6e-471 ... 5839e06441
Why do you care whether that market is manipulated or not? Isn't the real question whether you make money or not?

You're assuming that there is some "true", "natural" price that market should be at independent of government interference.

That's like saying "take your government hands off my Medicare!"

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Golfview » Sun Mar 08, 2020 5:29 pm

Your post is very encouraging especially considering all the negative postings regards to this matter.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Sun Mar 08, 2020 6:05 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 3:30 pm
physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
Does it make sense to you that the country that is at the epicenter of both the medical and economic damage, has the best performing stock market of 2020? I can understand how government support can contain a rout. But how can things look better today than they did in January? I don't see a plausible explanation, other than market manipulation and false price signals designed to pacify and mislead the Chinese masses. Personally, I'm staying away from investing in anything based on information from the Chinese authorities.
China appears at the moment to have gotten over the worst part and is on the road to recovery. It appears much of the rest of the world is just starting to have problems and it's uncertain if they will be able to contain things or how much damage will be done.

China information doesn't seem any less reliable than anyone else's information, if for no other reasons that there are international observers, e.g., from the WHO, the CDC, etc.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Sun Mar 08, 2020 6:25 pm

Seasonal wrote:
Sun Mar 08, 2020 6:05 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 3:30 pm
physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
Does it make sense to you that the country that is at the epicenter of both the medical and economic damage, has the best performing stock market of 2020? I can understand how government support can contain a rout. But how can things look better today than they did in January? I don't see a plausible explanation, other than market manipulation and false price signals designed to pacify and mislead the Chinese masses. Personally, I'm staying away from investing in anything based on information from the Chinese authorities.
China appears at the moment to have gotten over the worst part and is on the road to recovery. It appears much of the rest of the world is just starting to have problems and it's uncertain if they will be able to contain things or how much damage will be done.

China information doesn't seem any less reliable than anyone else's information, if for no other reasons that there are international observers, e.g., from the WHO, the CDC, etc.
Actually, they were anything but transparent in December and January, when it might have made a major difference in preventing community spread. They resisted international expert cooperation, and actually jailed doctors who were sounding quite legitimate alarms. News and information is zealously controlled and censored by the leadership to suit its own purposes, which raises obvious concerns with regard to its reliability, even at the present juncture.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Sun Mar 08, 2020 6:30 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 6:25 pm
Seasonal wrote:
Sun Mar 08, 2020 6:05 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 3:30 pm
physixfan wrote:
Sun Mar 08, 2020 1:30 pm
IMO, the Chinese stock market recovered quickly because (1) the gov implemented extreme measurements to lock everybody at home and that worked so the situation was better after a short time; (2) the Chinese stocks are at a low Shiller PE comparing to its historical values and comparing to other countries.

Now USA won’t quarantine whole cities, and the US stock Shiller PE is at a very high value now. Therefore I think the US stock market is going worse.
Does it make sense to you that the country that is at the epicenter of both the medical and economic damage, has the best performing stock market of 2020? I can understand how government support can contain a rout. But how can things look better today than they did in January? I don't see a plausible explanation, other than market manipulation and false price signals designed to pacify and mislead the Chinese masses. Personally, I'm staying away from investing in anything based on information from the Chinese authorities.
China appears at the moment to have gotten over the worst part and is on the road to recovery. It appears much of the rest of the world is just starting to have problems and it's uncertain if they will be able to contain things or how much damage will be done.

China information doesn't seem any less reliable than anyone else's information, if for no other reasons that there are international observers, e.g., from the WHO, the CDC, etc.
Actually, they were anything but transparent in December and January, when it might have made a major difference in preventing community spread. They resisted international expert cooperation, and actually jailed doctors who were sounding quite legitimate alarms. News and information is zealously controlled and censored by the leadership to suit its own purposes, which raises obvious concerns with regard to its reliability, even at the present juncture.
We're now in March and things have changed, including international observers. Since December and January they have acted aggressively to contain the problem and appear to have succeeded.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Corsair » Sun Mar 08, 2020 6:46 pm

HEDGEFUNDIE wrote:
Sun Mar 08, 2020 5:24 pm
Corsair wrote:
Sun Mar 08, 2020 4:55 pm
Worst PMI on record. Car sales down 80-90%. Metro traffic down 90%.

Stocks up :mrgreen:

How the invisible hand of the state works in Chinese stocks
https://www.ft.com/content/0d41cb6e-471 ... 5839e06441
Why do you care whether that market is manipulated or not? Isn't the real question whether you make money or not?

You're assuming that there is some "true", "natural" price that market should be at independent of government interference.

That's like saying "take your government hands off my Medicare!"
I don't care since I have never owned Chinese stocks.

For the US market I care. You seem to be saying you're okay with the risk-return tradeoff in investing not existing because the US tax payer is the one taking all the risk but not getting the returns?
Last edited by Corsair on Sun Mar 08, 2020 6:49 pm, edited 1 time in total.
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sun Mar 08, 2020 6:48 pm

In this thread, let's try to avoid going down the rabbit hole of conspiracy theories concerning China and its government. Posting data from credible sources or referencing reports from reliable experts is certainly a lot more persuasive.

Plus, we can save our beloved moderators additional work and anxiety!

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Mr.Wu » Sun Mar 08, 2020 7:15 pm

An earlier vanguard report estimates an impact of only 0.5% to China’s 2020 GDP growth, if the virus will be controlled in China. Accurate or not, it represents the market expectation the market valuation is based on. It makes perfect sense now China index has recovered as the virus is under control there.

Of course, all complicated economic issues can be simply explained by “China fakes”, as always.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by ralph124cf » Sun Mar 08, 2020 8:24 pm

China can get away with enforcing a quarantine. The Chinese people know that the government will send teenagers with automatic weapons to enforce the quarantine.

I am more worried about Italy. Italians regard government orders as suggestions. They are also confident that the government will not send Italian soldiers to shoot them if they do not comply.

Throughout history, quarantines have been very difficult to enforce.

Ralph

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by willthrill81 » Fri Mar 20, 2020 2:27 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I agree entirely on both counts. Their economy will be in the tank for a while because of the lack of demand for their production.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Seasonal
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Fri Mar 20, 2020 2:56 pm

willthrill81 wrote:
Fri Mar 20, 2020 2:27 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I agree entirely on both counts. Their economy will be in the tank for a while because of the lack of demand for their production.
Their own citizens represent a substantial market. Exports appear to be under 20% of GDP https://www.theglobaleconomy.com/China/exports/

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Fri Mar 20, 2020 3:34 pm

Seasonal wrote:
Fri Mar 20, 2020 2:56 pm
willthrill81 wrote:
Fri Mar 20, 2020 2:27 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I agree entirely on both counts. Their economy will be in the tank for a while because of the lack of demand for their production.
Their own citizens represent a substantial market. Exports appear to be under 20% of GDP https://www.theglobaleconomy.com/China/exports/
But that 20% fuels everything else.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Fri Mar 20, 2020 6:28 pm

gmaynardkrebs wrote:
Fri Mar 20, 2020 3:34 pm
Seasonal wrote:
Fri Mar 20, 2020 2:56 pm
willthrill81 wrote:
Fri Mar 20, 2020 2:27 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I agree entirely on both counts. Their economy will be in the tank for a while because of the lack of demand for their production.
Their own citizens represent a substantial market. Exports appear to be under 20% of GDP https://www.theglobaleconomy.com/China/exports/
But that 20% fuels everything else.
Evidence that the can't coast along on the other 80% for some time? Evidence the demand is gone for their exports, especially given the need for drugs, medical equipment and lots of other stuff they produce.

Meanwhile, much of Europe and the US are locked down. If you wanted an economy and stock that's looking good at the moment, you could do a lot worse than China.

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gmaynardkrebs
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Fri Mar 20, 2020 7:07 pm

Seasonal wrote:
Fri Mar 20, 2020 6:28 pm
gmaynardkrebs wrote:
Fri Mar 20, 2020 3:34 pm
Seasonal wrote:
Fri Mar 20, 2020 2:56 pm
willthrill81 wrote:
Fri Mar 20, 2020 2:27 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I agree entirely on both counts. Their economy will be in the tank for a while because of the lack of demand for their production.
Their own citizens represent a substantial market. Exports appear to be under 20% of GDP https://www.theglobaleconomy.com/China/exports/
But that 20% fuels everything else.
Evidence that the can't coast along on the other 80% for some time? Evidence the demand is gone for their exports, especially given the need for drugs, medical equipment and lots of other stuff they produce.

Meanwhile, much of Europe and the US are locked down. If you wanted an economy and stock that's looking good at the moment, you could do a lot worse than China.
Hey, look, who knows the future at this juncture. Yes, you could do worse, but that doesn't mean they are "good." They had a huge internal debt before this, and god knows what it is now.
More importantly, their role in the supply chain is likely going to be less. Probably not as much less as I would wish, but less.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Mr.Wu » Fri Mar 20, 2020 8:05 pm

For people who know better:

YANG Direxion Daily China 3x Bear Shares
FXP ProShares UltraShort China 50

You are welcome.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Angst » Sat Mar 21, 2020 5:33 pm

Hi Todd,
regarding your thread/post below, I think the board would be fascinated to see alongside it a similar graphic representation of where we in the US might be today with respect to our own growing cases distribution and plunging S&P. I don't think it would be unreasonable to correlate in time where we are today with where China's cases & equity indexes were as of Feb. 3rd, i.e. b/c we could be at a market bottom, but we might also have more to fall - we just don't know yet, so using this date might encompass both the hopes & fears of where we are at the moment. Of course ideas are cheap, it's the work of creating the impressive graphics that is "expensive"! I'm just throwing it out there though, and I trust it wouldn't be controversial - I guess you never know. Regardless, thanks for this great post! I've really enjoyed the scope of its presentation.
- Angie
SimpleGift wrote:
Sun Mar 08, 2020 5:26 am
In a recent thread, we looked at several historical pandemics and their impact on the U.S. stock market. There was generally a consistent pattern in all of these, where the outbreak lasted up to about a year, with modest stock market selloffs in the 10%-12% range, and usually a fairly rapid V-shaped recovery.

Several posters kindly objected that past pandemics are not a reliable guide to modern outbreaks, as the world has now changed, becoming more interconnected and interdependent. While agreeing with this view, we also now have current data from China, where we can see a pandemic and its stock market impacts in almost real time (charts below):
Interestingly, the pattern in China over the past two months is nearly identical to the historical pattern seen in past U.S. pandemics. Once the number of daily coronavirus cases started to climb, both of China's stock markets quickly sold off about 10%-12%. But soon, once the scope of the pandemic was better known and mitigation steps were underway, stocks started a V-shaped recovery, regaining their former levels within a few weeks.

This is NOT to suggest that the U.S. market will behave the same way in the months ahead — who knows what's to come for U.S. stocks. But the history of pandemics does indicate their market impacts are very often mild and temporary.

Thoughts?
Last edited by Angst on Sat Mar 21, 2020 5:45 pm, edited 3 times in total.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Blue456 » Sat Mar 21, 2020 5:40 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
The Chinese government now is not the Chinese government 30 years ago.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by jimkinny » Sat Mar 21, 2020 5:50 pm

Another nice post from SimpleGift, thanks.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by SimpleGift » Sat Mar 21, 2020 5:53 pm

Angst wrote:
Sat Mar 21, 2020 5:33 pm
I don't think it would be unreasonable to correlate in time where we are today with where China's cases & equity indexes were as of Feb. 3rd, i.e. b/c we could be at a market bottom, but we might also have more to fall - we just don't know yet, so using this date might encompass both the hopes & fears of where we are at the moment.
Actually, Forum member siamond has posted a chart of U.S. virus cases and the stock market selloff, last found here.

But in a PM discussion, siamond and I have come to the conclusion that, with so many panicked folks newly viewing and reading the Forum these days, it would be more constructive for us to focus on the Boglehead philosophy and "stay the course" message now, rather than posting charts that could inadvertently be fueling folks' fears and anxieties.

Your suggestion is a good one — but perhaps down the road when the mood of the Forum is calmer and more settled.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by gmaynardkrebs » Sat Mar 21, 2020 6:11 pm

Blue456 wrote:
Sat Mar 21, 2020 5:40 pm
gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
The Chinese government now is not the Chinese government 30 years ago.
I think the economy has changed more than the CP.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by yoyo6713 » Sat Mar 21, 2020 7:27 pm

I think when Wuhan was sealed off later half of Jan, I saw/read some complains that funds were not allowed to sell. Chinese market seemed to be mispriced or artifically propped up. When u.s. economy shrinks, there won't be many orders for the Chinese companies to fullfil.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by firebirdparts » Sat Mar 21, 2020 7:35 pm

It's kind of funny; I have a slice of my portfolio that is international and a slice that is EM. China is both, and so I looked at what's in both funds and tried not to overweight China. Now, I find that international is off 30% but Chinese stocks aren't really down that much. Oh well.

I monitor certain economic data at work and what I am looking at seems to have just minor economic impact. I don't really know how they prevent it from getting out of control again in another town, though.
A fool and your money are soon partners

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by watchnerd » Sat Mar 21, 2020 7:35 pm

gmaynardkrebs wrote:
Sun Mar 08, 2020 9:00 am
It makes no sense to me that Chinese stocks have been among the best performing markets in the world, when it is the epicenter of both the economic and medical crisis of this pandemic. The Chinese government seems to be massively manipulating its stock market.
I'm so happy I can hold China A shares via VWO.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Angst » Sat Mar 21, 2020 8:24 pm

SimpleGift wrote:
Sat Mar 21, 2020 5:53 pm
But in a PM discussion, siamond and I have come to the conclusion that, with so many panicked folks newly viewing and reading the Forum these days, it would be more constructive for us to focus on the Boglehead philosophy and "stay the course" message now, rather than posting charts that could inadvertently be fueling folks' fears and anxieties.

Your suggestion is a good one — but perhaps down the road when the mood of the Forum is calmer and more settled.
I appreciate your consideration and understand, and I look forward to being farther down that road. :sharebeer

Seasonal
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Re: Chinese Stocks during the COVID-19 Pandemic

Post by Seasonal » Sun Mar 22, 2020 5:28 am

yoyo6713 wrote:
Sat Mar 21, 2020 7:27 pm
I think when Wuhan was sealed off later half of Jan, I saw/read some complains that funds were not allowed to sell. Chinese market seemed to be mispriced or artifically propped up. When u.s. economy shrinks, there won't be many orders for the Chinese companies to fullfil.
Exports are under 20% of Chinese GDP. Exports to the US are under 20% of total Chinese exports. That leaves a whole lot of orders to fill even if the US goes to zero.

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Re: Chinese Stocks during the COVID-19 Pandemic

Post by fennewaldaj » Sun Mar 22, 2020 5:41 am

Isn't the Chinese stock markets performance a simple case of it is able to more accurately price in the exact damage of the Chinese response because it has likely mostly already happened. The US and European response still has to play out so there is a lot more uncertainty in how it could go. And yeah the Chinese central bank being able to buy stocks likely helps some.

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