Andy Xie: Why the bull-run days are numbered

Andy Xie, renowned Chinese economist, shares why the bull-run days are numbered in his recent SCMP article.

andy xie

“Andy Xie says government policy is driving the mainland stock market but it is a diversion for the masses and elite that cannot deflect from China’s need to restructure the economy.”

“But, when the market is pumped up by loans, any correction will mushroom into a collapse, as brokers have to liquidate when the money is nearly exhausted. The central bank’s recent policy action should be viewed in this context. Many speculators have leveraged 70-80 per cent of their total portfolio value. If the market dropped quickly by 20 per cent, it would go into free-fall territory.

What’s the end game? Chinese speculators work on the “bigger fool” theory. The biggest fools are supposedly the ” damas”, China’s legion of middle-aged housewives. But they lost everything in the 2007-08 crash. How to suck them back in is the challenge. The policy that allows individuals to open several brokerage accounts should be seen in this context. It will certainly create the impression of an avalanche of newcomers into the market. One basic dama psychology is safety in numbers. The impression of everyone jumping in could become self-fulfilling.”

Read the full article here…

Andy Xie

Dr Andy Xie 謝國忠Shanghai-based independent economist, has just been named “ 50 Most Influential Persons in Finance”by Bloomberg, and is currently director of Rosetta Stone Advisors.Dr Xie is one of the few economists who has accurately predicted economic bubbles including the 1997 Asian Financial Crisis and the more recent subprime meltdown in the United States. He joined Morgan Stanley in 1997 and was Managing Director and Head of the firm’s Asia/Pacific economics team until 2006. Prior to that he spent two years with Macquarie Bank in Singapore, where he was an associate director in corporate finance. He also spent five years as an economist with the World Bank.

Dr Xie earned a PhD in economics in 1990 and an MS in civil engineering in 1987 from the Massachusetts Institute of Technology.

Contact us today to engage Andy Xie to share his insights at your next conference.

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