I saw a chart last week that caught my attention, and I recreated it below. It shows the market capitalization weight of Chinese and Indian stocks. Finding historical weights is a little challenging, so my chart shows the year-end weight of the two countries, except in 2024, where I show the market weight as of June 30th, 2024. The picture makes it appear that the last half-year is a complete… Read More
A few years ago, I was listening to a financial podcast, and the person being interviewed said something like this: “Look, I’ve got a big China overweight in my portfolio. Look how much they’re growing – they’re going keep doing that, and I just want a part of that.” He was clear that he hadn’t done a lot of research on China, but thought it was ‘obvious’ that they were… Read More
One of the sources of optimism entering 2023 was that China was finally “reopening” after their long and agonizing Zero-Covid lockdown. Not only is the China-related optimism long gone, but markets are increasingly worried about the economic situation there. Although a lot of the news relates to a vastly overindebted property company whose bonds are trading for 35 cents on the dollar, the issues are much greater. First, growth is… Read More
You might not be surprised to learn that I love investment-related podcasts. I listen to about a dozen of them fairly regularly and am often impressed by the guests they get. A recent episode of the Meb Faber Show featured an hour-long interview with Professor Gene Fama. Fama is probably the most influential academic in modern finance after creating the Efficient Market Hypothesis in the early 1970s and co-creating the… Read More
Quick – name the country with the second largest stock market in the world! Obviously, we know that the US has the largest stock market in the world. But did you guess Japan, Great Britain or France? Those are good guesses since they are the three largest developed markets in the world. Maybe you guess China, which is the fourth largest market in the world as measured by the weight… Read More
Last April, I wrote that the Chinese stock market was red hot and that I didn’t watch China closely enough to say whether it was in a bubble, but it was an expensive market (click here for the article). By the end of summer, it was pretty clear that there was a bubble and that it was bursting (click here for the article), as we can see in the chart… Read More
Although China has been liberalizing in recent years, one of the most centrally planned aspects of their economy is the value of the currency. Yesterday, the People’s Bank of China (PBoC), their central bank, lowered the value of their currency against the US dollar by almost two percent, the largest one-day move in decades (although as currency devaluations go, this one was small). If you look at the chart below,… Read More
While Greece is getting all of the headlines, the bubble in mainland Chinese stocks that I wrote about in April and June is now bursting (click here or here for refreshers). The Shenzhen index is down -38.5 percent from its peak on June 12th through yesterday and the Shanghai index is down -27.9 percent over the same time period. The following shows these two indexes in yellow and orange compared to the S&P 500 in blue… Read More
Last week, I wrote that the emerging market stock indexes that Vanguard tracks will be adding mainland China A-shares to their index (click here and for a refresher). On Tuesday, MSCI, the world’s most popular index creator for non-US stock indexes announced they would not be adding Chinese A-shares to their emerging markets indexes. MSCI believes there are too many regulatory issues related to non-Chinese owners that could make owning… Read More
When the Communist People’s Republic of China (PRC) took control of China in 1949, all privately owned assets were expropriated by the government and what were once vibrant capital markets went dark until December, 1990 when eight companies started to trade publicly on the Shanghai Stock Exchange. Now, as I wrote in April, the mainland Chinese stock markets are red hot and many people believe they are in the middle of… Read More
