Financial Times: Chinese indices are removed from reality

PRC cc

You want to know why Chinese stocks bounced today? The Chinese government outlawed the selling of stocks for many people and just stopped trading for over half of listings.

That my friends is crony craziness on a massive scale. A Chinese scale.

(From The Financial Times)

Just as investors sold what they could to raise cash as futures were restricted and half of all shares suspended, when the government went all-in to boost the market, traders bought pretty much whatever was available.

When measurement tools are broken, investors who rely on indices are flying blind. With authorities trying to manipulate stocks up, they may be worth betting on anyway. But anyone gambling on China’s domestic shares should be clear: this is mostly a punt on how much the Chinese trust their leaders to control prices, not investment.

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