Chinese Roller Coaster and Holiday Bits

Headline from a Hong Kong newspaper last week

While many eyes have been on the shenanigans in Greece over the last couple of weeks, over in China, all hell was breaking loose on the stock market, resulting in the Chinese government taking some severe (and rather unorthodox/questionable) action to prevent an almighty crash, one that could have mirrored the 1929 Wall Street Crash in terms of financial devastation. 
Fifty per cent of stocks were suspended from trading (over 1400 companies), while company bosses and major investors were banned from selling up for the next six months.

The share rout wiped nearly a third off the value of the market since mid June, but had been preceded by a year-long rally generating dizzying gains.

As the newspaper headline in the above picture states, on 8th July 2015, HK$1.4 trillion was wiped from the Shanghai Composite Index.

That’s equivalent to over £116,000,000,000.00.  In one day…yikes!

No wonder people were panicking!  With the Hong Kong Hang Seng Index also plummeting at the same time, I witnessed first hand family and friends wondering if they too should bail or hold, as they saw their portfolios fall off the edge of a cliff. Seems like many people buy shares on margin (borrow to invest), including one woman who (according to the newspaper) had re-mortgaged her apartment three times and was now desperate to sell her property as she had lost nearly all of her money in the stock market crash….

The market has since recovered slightly and I’ve learned that one of my sisters was brave enough to buy when everyone was selling and she has made a tidy sum with the subsequent upturn, enough to pay for her next couple of holidays overseas! She was obviously following Warren Buffet’s wise words of “Be fearful when others are greedy and greedy when others are fearful“, although she may have had some prompting from her husband who’s an ex-trader!

Anyway, Ermine talks about it in more detail here and mentions how the ups and downs of the Chinese stock market could affect people who are invested in Emerging Markets, where there could be some exposure to China.

I don’t believe people outside of China can invest directly on the Shanghai Composite Index, but who would be brave enough?

A bit about my Holiday

I had a great couple of weeks in Hong Kong, spending quality time with my family and catching up with friends. The weather was very hot and humid, a welcome change from good ole British weather, although I gather there was a bit of a heatwave while I was away. Managed to squeeze in a couple of boat (junk) trips, a day out on the beach, two cinema trips, a free-style drawing event and lots of meals out – it was fab.

My family are all ok,  despite the cost of living being extremely high over there and continuing to rise. All working members of the family have very high disposable incomes so they’re actually all doing more than ok. 
In fact, with what was happening with the Chinese/Hong Kong stock markets, two of my sisters decided that they were better off with their spare money in property, so just like that, after a quick bit of researching (Zoopla and Google Maps), they put deposits down on properties in the UK. Nice to have cash spare and sitting in the bank like that, haha! They live very different lives from me!

The local English language newspaper (South China Morning Post) was full of adverts for Zone 1 London properties for sale – these apparently get snapped up rather quickly as they are often cheaper than prime properties in Hong Kong, so make great investments (although my sisters didn’t go for properties in London this time, they’ve opted for Manchester).

Holiday Spending

I didn’t spend too much on this trip and purchased only a pair of sandals and trainers, some small items for the kitchen, as well as a couple of gifts for colleagues. I got some cast-off clothes from my sisters (it’s great us all being around the same size!) and my soon-to-be-early-retired aunt gave me some surplus gym/casual wear.  Who needs to shop!?

I did spot one item while in a supermarket at such a ridiculous price that I just had to share here:

This is a gift box of Japanese grapes, sold in a high end supermarket (probably HK’s equivalent of Waitrose). 

Yes, the price is HK$758 – that’s £63 for a punnet of grapes, about £3 per grape!  Apparently the grapes were “rare, organic and specially harvested” – blah blah waffle!  There was only one punnet left on the shelf, so I’m guessing they’re quite popular despite the ridiculous price…oh how the daft rich people live, lol!

Anyway, just a couple of snaps below from my trip, plus a kind of ‘where’s Wally?’ kind of photo at the bottom (snapped by the professional photographer at the free-style drawing event I mentioned earlier) – yes, I am in the crowd, mingling and trying to blend in with all the young folk, haha! 

Those who have met me previously may spot me quite easily though!

Share Crisis Ahead?

So, back in July, I wrote a post on how a professor of Finance, one Arturo Bris, made a prediction on the next global financial crisis.

According to Bris, this crisis will apparently commence NEXT MONTH and likely to last for a whole year!

I hope to see this as a great opportunity to engage in some unemotional investing!

Time to batten down the hatches and ride out the storm!

Doomsday in 9 months?

Arturo Bris is a Professor of Finance who teaches Advanced Strategic Management and Strategic Finance at IMD, a top ranked Swiss business school. Previously, he taught at Yale.
So you could say that he might know what he’s talking about when he predicts that the next global financial crisis will hit in April 2015 – only a mere 9 months away – and that the crisis will last for a whole year! 
Professor Bris believes there are 8 possible scenarios as to why there will be another meltdown:

A stock market bubble: “In the past year, stock markets have performed unrealistically well and at some point the situation will explode.”
Banking in China: “A severe crisis could be driven by growing Chinese shadow banking.”
Energy crisis: “If the US (the world’s largest producer of gas) begins exporting to the rest of the world, Russia might feel threatened, causing a geopolitical storm.”
Another real estate bubble: “There is a risk of a property bubble forming in countries like Brazil, China, Canada or Germany.”
Ratings and bankruptcy crisis: “Companies currently have too much debt and the new norm is to have a BBB rating.”
War and conflict: “There is increasing geopolitical tension. Events like the current crisis in Crimea could trigger a market crash, even if there is no war.”
Increasing poverty: “Overall world poverty has increased and whenever the poor become poorer, we can expect a social conflict.”
Cash and hyperinflation: “The surplus of cash that central banks and corporations are holding could end up damaging the economy.”

(More info here)

So what’s an Investor to do?

As someone who wasn’t an investor back in 2008, I have no idea how I will react to prices tumbling and all hell breaking loose. I would hope that I stay calm, develop nerves of steel and be able to sit tight…though I’ll probably sweat a little lot!

So, my strategy (if you can call it that) is to continue doing what I’m doing now, ie monthly investing into a mixture of equity funds, bond funds and putting aside some cash.  

Hopefully I shall see any crash as ‘opportunity’, though this will probably be easier said than done!

So…9 months to go…. I’m betting there’ll be no baby shower for this ‘Apocalypse Baby‘!
I’ll start a countdown til the waters break like a tsunami…