Back in December, we wrote about how China was playing Palov's dog when on one hand it tried to clamp down on "excessive" speculation, while continuing to provide fodder for hungry speculators with the other. Fast forward 4 months and the results of the Politburo's efforts become evident, and rather grotesquely so.
Sparing on the narrative, we will present readers with a few charts that speak a thousand words and probably explains why anyone worth their salt should think twice before wagering in the Chinese market.
Manic Retail Speculation
As Xi Jing Ping along with his administration continues attempting to orchestrate a soft landing of China's economy, much to the hilarity of those that actually watch real economic and financial data emanating from the world's second largest economy, it seems the retail community has been much less patient about another economic growth renaissance and has taken their tokens directly to the financial markets in hopes of striking it big.
What they should have probably done was to read our note about how misguided the retail community actually is, and why most of them consistently loose their shirts as if the game was rigged against them.
If readers need a definition of what a mania is, the charts below should shed some light. Enjoy...
If past is prologue, and if history does rhyme this time, the following NASDAQ redux could be a harbinger for utter mayhem in China's markets. We will see in a few weeks time...
And as if China's markets weren't large enough to contain all that dry powder, retail fund flows have spilled over to neighboring Hong Kong. It doesn't seem to be stopping...
Bonus chart: Are the Chinese making up their economic figures?
It is not just us; almost every single Investment Bank and fund house seems to think so too. From huge discrepancies in trade figures, to bogus private sector numbers, China's nose has been growing longer ever since it was pressured to perform as the world's second largest and fast growing G7 economy is expected to.
But in the market's eyes, all this is immaterial. Because the only thing that matters is a guarantee by the PBoC to backstop every dip in the stock market, so that mum and pop can continue on their buying entourage.