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Comment by Mikeb85 | Hacker News Reader

Chinese indices are still up significantly for the year. I personally ploughed money back in two weeks ago, sitting up about 15%. I wouldn't worry too much, it's just a correction. As for India, I'm sure some traders moved their money there, why not, but a lot of this 'news' is simply noise, trying to decipher why traders do what they do.

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3/4 of all stocks had to be frozen to stop them from falling drastically. China has had to shoot the equivalent of 9% of its GDP into the stock market, manipulate the price of every megacap stock directly, and threaten to arrest people for negative sentiment. The billions they're throwing at propping the market up had to be utilized at a time when their economy is in deep trouble, they're drowning in debt, GDP growth is far less than claimed (1% electricity use expansion, weak exports, weak PMI, weak imports, weak commodity market, falling real estate market), and the central bank consumed $300 billion of its reserves in the first half of the year.

Meanwhile Shanghai is up nearly 100% in a year for absolutely no reason, with the original lift-off being caused solely by margin and mania.

The average PE for Shenzhen is nearly 50. ChiNext has been around 100. SME is around 60.

I disagree that it's just a correction. Their market has nowhere to go but down. Their economic growth isn't going to accelerate dramatically, such that it justifies a continued market run like they've had. China's central government is trying to prop up their stock market bubble to save face. In my opinion, the only possible outcome is that the market must fall. They can try to semi-nationalize the market, waste trillions of dollars, tightly control all trading and capital - and the market will have to fall anyway.

Their economy isn't in trouble. GDP is up 7% YoY, retail spending up 10% YoY. Household debt is low, the government is flush with cash. Yes the market has more downside, but that's just the stock market.

What gives you so much confidence in the Chinese economy? what's the reason for such a strong conviction?

The Chinese economy is still growing. Fast. The stock market was overpriced, so there was a selloff. Such things happen. Usually not with so many stocks at once, but its really not unusual. The fundamentals of the Chinese economy are still good, they still have a growing middle class, household debt is very low, and the government is still flush with cash.

Edit - also retail sales are up 10% YoY. GDP up 7% YoY. A bunch of other economic indicators are also good.

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