Chinese Stocks Bounce Back

After the bank run in Shanghai and Shenzhen yesterday, where the stock markets were both down 9%, the up bounce happened today. The markets in China were back up 4% today. Check out the CNNMoney.com article on it.

The first thing that I thought when i heard about the "black Tuesday" in China was perfect, now i can get in on the dip. As I posted previously, all the people I know in China know it is going to be a great year for stocks. Everyone is going to buy in and make money. This might be a bubble, but it's not going to burst anytime soon. People just saw other people selling and decided to sell themselves. Although it seems that the central bank is going to institute more profit taxes as well as other measures to slow down the Chinese markets, it will not deter the investors. Here's how CNN Money saw it:

Analysts noted factors which boosted the index 130 percent last year and a further 14 percent to this year's peak - such as strong corporate earnings growth and billions of dollars waiting to be invested by newly created mutual funds - remained.

Many Chinese shares are valued at over twice the prices they might command in foreign markets, so fears that a "bubble" could be bursting have accompanied every big fall this year.

But analysts and fund managers argue that the vast demand for equities in China, as well as its isolation from international markets due to capital controls, mean the market as a whole is not prohibitively expensive.

"The mainland's ample liquidity remains fundamentally happy at these [high] A-share valuations and prospects for China growth," said Green.

Although foreign investors continued switching out of richly valued financial stocks this week, there was no sign in the stock or currency markets on Wednesday that they were pulling large amounts of money out of China.

In the big city brokerage trading rooms, where hundreds of thousands of individual Chinese have poured money into stocks over the past nine months, the mood was calm.

I commented on my own post last night in response to my friend wang's post.

However, i don't think today's 400 point drop in the dow was the direct result of any selling of treasury bills by china or a quick de-evaluation of the Chinese yuan (like what happen in Thailand in 1997). It was based on speculation created from fear and uncertainty. That is the only reason why awesome companies with great fundamentals and great earnings fell with everything else today.

Again, there was, and is nothing fundamentally wrong with the Chinese market. It's just a one day scare. The primary victim in this scare: the West.

People in the West have no idea what is going on in China. They are unsure, intimidated and even scared of China. That is main reason why the Dow fell so much yesterday. It will be interesting how the western markets mature in their view of the Chinese market after this jolt. Let's also hope China stops messing with the West's head and emotions.

There goes the Stock Market

The Dow just closed down more than 400 points today. This is the single biggest drop in points since the first day of trading after 9/11. This is the single biggest drop in percentage since the invasion of Iraq in 2003. What triggered it?

China.

hahahaha. The Shenzhen and Shanghai stock exchanges were down more than 8%. This was the largest drop since the 1997 Asian Financial Crisis. A lot of the stocks fell the daily maximum of 10%. This is crazy. The best performers like the big banks (Bank of China, ICBC, China Merchant's), the Airlines (Air China, China Southern), construction companies, communications companies (China Mobile, China Unicom) were all down huge.

What does that mean?

• The Chinese stock market and economy has a major influence and effect on the global marketplace.
• This shows the uncertainty of the Chinese market
• The year of the boar with double luck and double prosperity ive been hearing about has an interesting start
• The west is really afraid of China. Everyone I know in China knows that this year will be a great year for stocks. With a sudden jolt in the china markets, the US dialed it back and killed their market. While I was watching CNBC channel during it, many people were talking about how this day was unseen in their 20 years of working as a trader.
  

The interlinks in the global economy due from globalization has created an atmosphere where anything effects everything. Let's just hope a global recession isn't in store tomorrow.

NYC Taxi Cops

This Saturday night, I was in New York City, in a car on the east village. I only have a couple of friends with cars in the city and the reasons are very clear why that is. The traffic is decently slow, the streets are small and the parking is non-existent (it definitely feels like Shenzhen). We were trying to go to a friend’s place, but we couldn't find a place to park. Instead of just parking anywhere and not worry about the non-existent tickets that would result, if I were in Shenzhen, we drove up and down street after street, only to find fire hydrants open.

After 10 minutes of looking, we were disgruntled but not defeated. We decided to go a little bit further away to try our luck. While stopped at a right light, attempting to turn right (there’s no turn on red in all of NYC), a yellow cab suddenly came out of nowhere and ran the red light. While it passed the intersection, however, it turned on what seemed like custom-made lights inside that flashed red and blue. My friend and I both thought that it was a taxi that was pretending to be a police officer so that it could get away with violating traffic laws (a very smart idea if it was). Instead, it was just the opposite, it was a police officer, undercover, pretending to be a taxi cab.

The third person in our car explained to us that there have been a growing number of these “undercover” police cabs in the city. They are there not to protect against terrorists or anything of that sort. They are there to catch possible traffic law offenders while blending into the background. They have the ability to issue tickets for parking, speeding, running lights, ect.

This is amazing. Let’s analyze:

• It is the perfect way to see what is actually going on by blending into the background. People act differently when there are people of authority around. This reminds me of my perspective and situation in Shenzhen (and the title of this blog). Haha.
• How did this not happen earlier? Air Marshals are on airplanes. Undercover police are on subways pretending to be beggars. It’s about time the police disguised themselves on the street.
• I’ve described this experience with a bunch of different people. In my limited sampling, it seems that NO ONE knows this is actually happening. I guess it’s a new thing.
• Talk about irony. When people refer to China, they always talk about how it is an authoritarian police state. However, if your actually in China, you never see police anywhere. Compare that now to the United States. This beacon of freedom and democracy has police hiding in taxi cabs. Wow.
• China should learn from this. There should definitely be more police on the street in China. Maybe then, the amount of traffic violations and traffic jams caused would decrease.

While talking to my friends who live in NYC, there is a consistent feeling of more and more of their rights slowly disappearing. Is this in the name of safety and terrorism? I don't know. I do know that it feels pretty free in China and taxis run red lights at night without other taxis chasing it down.

Money Money Money

Before getting to the views of the US of A, I wanted to first discuss the beauty of Hong Kong.

Before I left for the US on Feb. 23^rd, I was fortunate enough to spend a day-trip with my grandparents in Hong Kong. My grandfather is almost 80 years old and going strong (he plays tennis 3x a week). My grandmother is approaching 76 and destroys me at pingpong every time. I wanted them to get a glimpse of Hong Kong before it was all done and over with. It had been many years since they had been to the US to visit my family and a little western life would be new and cool.

I had originally planned to take them around by myself on a two-day excursion, preparing everything and staying overnight at my company apartment. However, realizing that that would completely stress and overwhelm me with planning during my vacation, I decided against it. Instead I spent money for the 3 of us to do a day trip through an agency. 250 RMB a person for 2 meals, tour guide, a Victoria harbor boat ride, and most importantly, no planning to worry about. Good deal.

Since I had traveled in Hong Kong a few times (and I work there sometimes) I was prepared for a pretty boring day of sightseeing. However, I was pleasantly surprised by experience and most especially, the tour guide.

Our tour guide was a Hong Kong guy in his mid-30s. He was very social and engaging in his monologue on the bus. With his crude humor, knowledgeable factoids and decent 普通话 (putonghua), he entertained everyone on the bus, especially my grandparents.

Here are some of the highlights of the his tour:

• A description of Hong Konger’s love and admiration of 邓小平 (dengxiaoping) and the economic reforms he introduced. It was his visionary look on the future that helped make the new Hong Kong happen.
  
• A simple, yet interesting description of the difference between HK’s Capitalist society versus China’s Socialist society.
  
• Interesting stories about Jackie Chan, and bus rides past his house and office. Hot.
  
• An accurate and informing history of Hong Kong and the various waves of immigration with respect to Chinese influence (ie. Cultural Revolution = Rich people coming to Hong Kong)
• Honest care and advice for his tour.
  
• Money, Money, Money.

In the presentation, I noticed that the tour guide always talked about money. With this, I had to count how many times the he referred to money. It could have been how much something was, making money, how to make money, how much a house was, how much the value of the house has grown, ect. (I usually count the amount of “umms” or “likes” people say while they’re talking if they do it a lot. Just one of those things).

It turned out that he referred to money more than 120 times during the trip.

WOW.

From how much Jackie Chan bought Bruce Lee’s house for to how much the going rate for a box for your cremated remains, from the taxes on alcohol and cigarettes to how much money he lost during the Asian Financial Crisis in 1998, he didnt leave anything out.

This vast and consuming discussion about money brought me back to the different conversations I had with my cousin TT during Chinese New Year’s Eve. That night she discussed how much she disliked Shenzhen and its lack of culture. The city was based around finance and didn't have any semblance of culture. Money and how to make it was what everyone talked about.

When I started thinking about it, I realized that this was dead on. I rarely talked about anything with my friend Simon other than which stocks are good, what business models would be successful in China, how to make money, ect. That’s what Shenzhen revolved around (and I guess, that’s what it was built for).

My cousin Ding, who works for the Shenzhen municipal cultural department agreed as well. It seemed that people were brought up differently here. Here’s what he described:

In the north, kids are brought up with the importance of education (me included). The goal that the kid are pushed to strive for is good grades and going to a good college. True merchants were looked down upon and an entrepreneurial mind was discouraged.

In the south, however, school is very seldom stressed. Instead, the goal that the kids know is financial based. Through experience and hard work, maybe you can do something to make a lot of money. Simon, who has lived in Shenzhen all his life, described the various business ventures he did when he was a kid. He and his friends formed at least 2 different small businesses each year based on the timing starting when he was 9. They would go into selling flowers, shoes, book bags, basically anything to make a profit. This is how they grew up. They believed that “learning by doing” was the way to go. If they ended up losing money in the venture, they would just look at that loss as the price of their education.

In my experience, his Ding's statements were dead on. A friend of mine made almost 1 million RMB in a year by doing the arbitrage game with shoes from Shenzhen to the north. He was only 19. Instead of his parents supporting him in his successful business venture, they were disappointed that he didn't go to college and tried to do anything and everything to get him to go. Currently he's at a random university in Australia, fulfilling his parent's wishes. Typical northern family.

This recent understanding of the importance of money in the regional culture of Shenzhen, Hong Kong and Guangdong province in general, has made me feel many different things. I had seen glimpses before but had never quantified it entirely. Now, after this realization, here are my thoughts:

• I have had off and on feelings of something missing from life in Shenzhen and I think this is it. It’s difficult to talk to people about anything other than money. After 6 months of this, a person thats previously had not focused on money (me) can go crazy.
  
• At the same time, this is good for me. I grew up in a strict-academically based home (my mom is a professor and her parents were also professors) and I need to add the entrepreneurial spirit that’s so strong in this area. Learning through experience is definitely apparent.
  
• I often try and think/develop business ideas. Moreover, I have a few possibly successful ideas that I’m working on.
  
• Where did this focus on money come from? Was it the influence on Guangdong province from Hong Kong or was it formed a long time ago?
• This is why Guangdong province is so incredibly successful in the world stage. This is not only where Chinese people who want to make money (whether it’s migrant labor trying to get ahead, HK businessmen with capital, ect.), but it is where the world is coming as well. Of course it’s location and proximity to HK has something to do with it as well.
  
• I wonder if the culture is similar in the Shanghai region as well. Can anyone who know about Shanghai add their 2 cents?
• This entrueural spirit feels like pure excitement. There are so many oportunities in China for anyone with a good idea. It is the ability as a person to take advantage of these opportunties. This is a big difference from the seemingly repetitive life of the US and even NYC.
  

In terms of my experiences, I am most definitely excited about being able to be apart of this. I feel incredibly fortunate. Simultaneously, however, I wonder how my views, observations and insights about Chinese culture is skewed by living in this area where there is only 1 focus. For example, how can I talk about the Chinese worker where the Chinese worker here might be completely money oriented where people in northern China might be totally different in their focus? You just never know.

As much as this lifestyle is different from what I'm used to, its absolutely pure and enjoyable. Who knows what come of my living here... but ultimately, I guess its most immediate effect is that it’s going to make writing this blog that much more interesting and challenging.

Business Trip

I'm on my 3rd business trip to the company office at Norwood, MA for company strategy meetings all next week. It's gonna be interesting.

Since i'm in the US, i'm gonna switch it up a little bit and try to observe the US through the eyes of a Chinese.

Let's see how it goes