Rodman & Renshaw, one of the most active underwriters of Chinese stocks, has killed all China stock coverage, Herb Greenberg is reporting at CNBC.
The move comes after a dozens of Chinese stocks that trade in the U.S., many of them created through reverse mergers, have tumbled in the wake of accounting controversies that has sparked regulatory scrutiny.
In a letter to clients late Friday, the company offered no explanation other than to say, “Effective immediately, we are terminating coverage of the following companies to allocate resources more efficiently within our coverage universe. Upon termination of coverage, any of our prior projections should not be relied upon.”
According to Greenberg, the letter listed 14 stocks.
Bottom line: China is a house of cards, built on a bizarre combination of free market capitalism and local government power. Incentives were given to local political officials to "grow GDP" in the most bizarre fashion possible. Building infrastructure, apartments etc., without any consideration of demand for such projects, but, hey, it boosted the GDP numbers. The coming collapse of the Chinese economy and stock market is going to be one for the history books. Rodman & Renshaw sees the writing on the wall and has wisely chosen to bail before the crisis is in full force.
Mr.Wenzel how can China be a bubble? The people work hard, live in tiny tenement buildings and grind their ass off. Americans sit home, collect SS, eat mcdonalds, and pay for it with their unemployment checks. Which is the "bubble", hard work and saving, or printing paper and handing it out, while sitting on your ass? Please answer honestly, forgive my slang and poor english.
ReplyDeleteHow many more Ghost cities can they build before the deck of cards fall?
ReplyDeletehttp://www.youtube.com/watch?v=rPILhiTJv7E
China appears to be the Black Swan circling the world economy. A major crash there will have worldwide repercussions of a magnitude most people are incapable of imagining. Without them purchasing our debt, and producing cheap goods, the standard of living in the West will drop dramatically. The ongoing stealth redemption of long dated Tbills is already showing the folly and futility of "Operation Twist 2.0".
ReplyDeletehttp://www.youtube.com/watch?v=7g9WjcGdxuM
ReplyDeleteE Chang, your characterization of the US is a little broad, but correct for a portion of the US populace. The people of China are working hard, saving money and trying to increase their standard of living, BUT the government of China is using those savings to subsidize the world (by buying the debt of US/EU) and the hard work of the people is being used for unprofitable purposes- building "ghost cities" and ignoring market signals that allow a business person to know if they are engaging in productive work.
ReplyDeleteTHAT is why China is in a bubble. Unless work is directed into productive creation, not just mindless construction, then no real value is created. Until the Chinese government decides to allow the market to work, and abandons communism, China will suffer.
Your English is very good- I wouldn't have known you weren't a native speaker.
RDFitzgerald
Re: Chang, The point is not whether people are working hard and living meagerly vs the us welfare state. Even with the US welfare populace, there is a large portion of americans who work very hard and get to use their money as they see fit (although this is being devoured by the government at a rapid rate). In china, they work hard, save and that money is then misallocated to government approved projects, which redirects them away from consumer demand, which is the source of wealth creation. That is the problem. In the short term, this will lead to a huge crash as Mr. wenzel is pointing out. But, after the crash, if the communist government gets less powerful and freer markets prevail, this will be the chinese century. Unless the US government also gets drastically smaller and less restrictive (extremely unlikely, but not impossible), in which case, it will be the joint american-chinese century.
ReplyDeleteI still do not understand. Where is the bubble? Is it in US or China? US has no savings and no jobs. China has savings and jobs. US is largest debtor ever, China is biggest saver ever. US is fighting 8 wars on credit, China is buying Gold and mines. I still do not understand how China is the bubble and US is ok? I think US is the bubble and China is ok.
ReplyDeleteChang, imagine you save your money in a bank that loans it to irresponsible people. They then lose all that money. Where are your savings? They are gone, spent on useless things. THAT is the problem in China. They have loaned all of your hard-earned money to people in the US and EU, and they have wasted it.
ReplyDeleteOnce the Chinese people figure that out, then the Chinese economy will suffer (as will the US/EU economies) and all that hard work and savings will be gone.
Thank you very much Mr.Fitzgerald you have answered my question. People in China buy gold now for retirement, they could not do that ten years ago.
ReplyDeleteChang, I live in Beijing, have lived in China for 28 years, and have studied China's economy, society and history all my life. Right now we have horrendous inflation here due both to the policies of the central bank and the mercantilist policies of the central government. The banks are effectively bankrupt given that up to 50% of their loans are non-performing. Local governments have invested in unproductive real estate to no-end and have few means to keep the gravy train of land leasing going. The central govt. lacks the means to bail both the banks and the local governments out and has had to invest the proceeds of their export driven/mercantilist economic growth into US Treasuries which will soon be worthless. There are many bubbles in China not only in property, but property is the most glaring one. Cash savings will disappear both from inflation (the most pernicious tax) and from bank failures. Things don't look very rosy and I don't envy the govt. who is walking a tightrope with no safety net. We are headed towards interesting times for sure.
ReplyDeleteJust remember, the Chinese people .. or the US people are not their governments...in spite of all the education that you received creating the identification between self and the state.
I think you're all missing the big picture, it isn't about just China and the US, or who is worse off then the other... gents, the whole world is in a serious pickle. It's going to be the greater depression and because of globalization, everyone is going to feel the pain.
ReplyDeleteIF YOU BELIEVE THIS TRASH YOU WOULD BELIEVE ANYTHING....CHINA IS AN INDUSTRIAL BLACK HOLE AND IT IS STUPID AMERICA WHO WOKE UP THE 'CHINESE' WITH THEIR BASELESS DIATRIBE ON 'DEMOCRACY'AND 'CAPITALISM'. IF CHINA WAS STILL ASLEEP THE WHOLE WORLD WOULD HAVE HAD THEIR FLOURISHING INDUSTRIES NOW THEY HAS ALL BEEN SHIFTED TO CHINA...THIS IS THE BASIC BASIC CAUSE OF ALL THIS NOT THE STUFF ALL YOU PEOPLE WRITE AND BELIEVE....WAKE UP AND SMELL THE CHINESE CHEESE CAKE...FOOLS....ahmarr2002@yahoo.com
ReplyDeleteBefore reading the comments attached to this report I half-expected some idiotic, misinformed statements. Imagine my surprise to see some great responses to E Chang's question! Gives me hope that some people do know the real state of what's going on. Thanks to those who took part in some good, constructive discussion ;)
ReplyDeleteThe Chinese governing classes did not take up capitalism because of American propaganda. (They haven't adopted Democracy, our other main philisophical export). They adopted it because their centrally planned economy was not creating wealth for the restive masses, and their power was, and is, at risk. It was self preservation. Unless they allowed some controlled flexibility into their system, it's brittle structure could have imploded.
ReplyDelete