Xie Guozhong: Only The Property Market Crash Will Make The Stock Market Better.

There was a bar near my house. Recently, a waiter in a bar asked me how did the Shanghai stock market last? I replied, it's about 2600 o'clock. He jumped up and said, "no! How can the government make the stock market fall this way? "

In the next 10 minutes, he tried to convince me that the government would raise the stock index to 8000 points in the next three to five years.

"Looking at Hong Kong stocks is now the 20000 point," he said. "It is not unusual for the Shanghai stock market to rise to 8000."

The Chinese stock market has 124 million trading accounts, more than the rest of the world in terms of the number of investors. As far as I know, the overall enthusiasm of investors is still very high. The stock market is not large at present, accounting for only 53% of GDP, accounting for 31% of the money supply. P/B (share price / book value) is about 2.5 times, at a historic low. Why is the stock market still moving down?

After the central government introduced measures to regulate the property market, many people were hopeful that the outflow of capital from the property market would flow into the stock market. The popular yo yo theory tells people that funds only travel between the property market and the stock market and do not run elsewhere. Now, the property market has not dropped much, but the stock market has fallen by 20%.

soft landing

China's stock market is driven by politics and liquidity, but there is no good news either. Although the government hopes that the property market will achieve a soft landing, the debate over the housing bubble has ended. Tightening has become a consensus. The only question is whether the pace of regulation is tight or loose. When the government squeezed the liquidity of the property market, the liquidity of the stock market is also affected. The two markets are all down.

The downward adjustment of the stock market is directly related to the regulation of the property market. Real estate appreciation is the biggest source of profits for every industry, especially in the financial sector. The value of housing stocks, construction projects and land reserves may exceed 3 times that of GDP. Property prices rose by 20%, equivalent to 60% of GDP.

In a normal economy, corporate profits are generally 10% of GDP. When assets increase to 6 times of the profits of enterprises, enterprises will play financial games and turn asset appreciation into accounting profits. When property prices cease to rise or even fall, very profitable companies suddenly become unprofitable.
Bank shares

State owned banks are queuing up to raise 500 billion yuan in the stock market. Although 2/3 will be raised in Hongkong, the remaining 1/3 is still a big burden for the A share market. In 2009, the financing of the A share market was 456 billion yuan.

Banks are usually a money making machine, but someday they will suddenly lose all the money they made. After the banking crisis, it is a good time to buy bank stocks. But when banks raise so much money in response to the housing market adjustment, it may not be a good time to buy bank shares.

Reasonable valuation has never been the reason for supporting the entry into China's stock market. However, the valuation of China's stock market is reasonable now. 2.5 times P/B is not cheap, but according to international standards, it is at a reasonable level. I advise you not to pay too much attention to P / E ratio. P / E has been seriously distorted by asset bubbles. The decline in valuations may be just a stage of returning to normal.

For a long time, the share of the circulation of many stocks in China is very small, a bit like that of Internet Co stock. After the share reform, all stocks can be circulated. The valuation of China's stock market is returning to normal as there are no non tradable shares trading at the discount market. This is an improvement. The conclusion is that the Shanghai stock market will not soon return to its 6000 point in its heyday. This will disappoint many people. {page_break}

market crash

The rich have stopped playing in the stock market, and they have turned to the property market. Most people believe that property prices will rise or fall. Today's property market has not experienced the collapse of the property market in 1997.

On the other side, the stock market experienced a crash in 2007 -2008, falling from 6000 to less than 1700 in one year. Those who can afford to rent houses find that the stock market is a bad place. That's why the property market has been booming since 2007, and the stock market has been struggling. Of course, if property prices drop like the stock market in 2007, the stock market will be in a better position.

Chinese investors often have no money to stir up big cities' houses. They hope to have enough luck, earn enough money, and then turn to the property market to fight. When the stock price rises to a certain point, these people will run away and limit the appreciation of the stock market. When the stock market falls, these people will not become the supporting force of the stock price.

Finally, the bar waiter asked me to recommend a stock. He said he already had 70 thousand yuan, hoping to earn enough money to buy a car.

"I can't buy a car on my income," he said. "You see how hard my work is. But if I make 200 thousand in the stock market, I can buy a good car. "

As long as the property market does not collapse, ordinary investors should not expect to earn free lunch and new cars from the Chinese stock market. {page_break}

Xie Guozhong: I will let you know when the housing bubble is about to burst.

"My nanny just resigned," a friend in Beijing told me. "She hurried home to buy a house. I suggest that her loan should not exceed 70%. If there is any loss, there will be at least some cushion. " This is not the first time I have heard such a story. It seems that at the same time, all nannies have entered the property market. For fund managers, a babysitter can be a lot of benefits. China's nanny may be the Asian version of shoeshine boys. Another friend took a vacation in Sanya and went to see the sales office. Everyone she knew bought a house there, and she seemed to be out of place. "You should buy two sets," the sales girl suggested. "Three years later, it will turn 1 times. When you sell one set, the other is white." How can a man refuse such a proposal? In the case of official corruption, the signs are no longer cash filled with fridge, or small famous actresses as mistresses, but rather how many houses. When a bureau official in Shanghai was arrested, there were 24 houses.

China is in the throes of real estate investment frenzy. I want to state that China's real estate is a "bubble" and does not negate China's achievements in development. A key component of bubbles is optimism, and optimism is inseparable from economic success. Besides, it does not mean that prices will drop tomorrow. The development and destruction of bubbles has its own timetable.

The expectation of RMB appreciation may be the main force to stimulate bubbles. First of all, it caters to the desire of people for free lunch. Secondly, the story of RMB appreciation left Chinese money in the country. The dollar has always been a haven for Chinese assets, and those who are full of faces have dollars abroad. But now, all the money has come back. More importantly, any income is lawless and illegal. Now it stays in China and does not go out. Want a house, not cash.

Why do corrupt officials keep houses instead of cash? Why do we need cash when property prices soar? Corrupt cash can earn more money when it comes to the property market. Only when caught, can corrupt officials realize that holding immovable property is harmful.

Because of interest, the Chinese government has been trapped in a bubble. The money to sell land is in the hands of the government. Land prices account for half of the cost of development. In hot spots, the cost of land exceeds the cost of development - the government should now get the future price income. When the house was sold, the government received transaction tax and profits tax. Real estate developers pay more taxes to the government than they earn. When real estate developers finally get in, they have to invest more money. Wall Street analysts will suggest that they buy land. Because land prices have risen a lot and poor income is insufficient, they have to borrow money. All their income and interest on borrowing money came to the hands of the government. Can you blame them for boosting the price of the property market?

The obsession with land is another driving force. Not long ago, China was an agricultural country. The most important asset is always land. Of course, in the city, you can not see the ground, only to see the building on the ground, but after all, the building is also on the ground.

Now, the nannies are going to buy a house. Who else? Never underestimate the power of 1 billion 300 million people. In China, many people say that you should listen to the advice of shoeshine boys. In fact, many people will listen to him.

Welcome to China. This land can make you get rich quickly.