> Kemian Wood Industry, which used to boast of the quality of its composite floorboards, took radical steps to deal with the downturn. It switched its focus to online gaming and changed its name.
> A hotel group rebranded itself as a high-speed rail company, a fireworks maker as a peer-to-peer lender and a ceramics specialist as a clean-energy group.
I've heard of pivoting, but this goes way beyond that. Doing a complete 180 on what you're producing/selling and changing your name? That's both fascinating and scary at the same time. As a customer, how do you know whether the company you're buying from will still be around?
I think it's worth entertaining the possibility that these companies are not actually producing anything after their "pivot" but are just bilking investors.
It makes you wonder what the determinants of success are for a Chinese business. Would you trust cars made by Nike, if they suddenly started making them, or a airline run by the Hilton Group?
Most of these seem to be more or less "backdoor listings". A company that wants to list (Zeus Interactive in this case) essentially "buys" a stock symbol by merging with a defunct or flagging company (Dalian Kemian). It's easier to list this way than doing an IPO.
So it's not really a "pivot" and I feel that the article is slightly misleading on this front.
This is quite common in Australia, I hadn't realised it was a thing in China until now.
In Australia there are fair number of zombie listings from mining / prospecting ventures that didn't pan out. Often they're wound back to basically being a P.O box. It is very, very common for tech companies to list by doing a reverse merger with a zombie.
I find myself noticing that a lot of the solutions that The Economist proposes are very similar - opening markets, decreasing regulation - make everything more "liberal". They always make compelling arguments for their suggestions but I also find myself wondering whether they ever argue for any alternative
They also advocate for things like gun control and health care reform in the US. I believe they've also advocated things like a carbon tax, as they give credence to the scientific consensus on global warming.
They also tend to be fairly 'practical' in their support for candidates. I recall some years ago when they absolutely laid into Silvio Berlusconi and recommended the left-wing candidate despite Berlusconi being, in theory at least, the more 'business friendly' candidate. They rightly argued that he was mostly just friendly to his own businesses.
So, yes, they are 'liberal' in the European sense, but not necessarily 'libertarian' in the US sense.
The Economist has always been "The answer is free markets! What was the question?".
I always find it a reassuring read, in the sense that well-written, well-researched, persuasive articles that I disagree with are a sign that I haven't been completely engulfed by my own little information bubble, but take it with a pinch of salt.
As a short term solution, I would say they're probably right. However, sane advice would be to look for a sustainable alternative. I guess it's just because they have a liberal bias, but in any case I can't see The Economist proposing a slower, yet more sustainable growth.
"After double-digit growth for much of the past decade, sales have slumped" - you don't say... or perhaps they expect that rate of growth to continue without end? Yes, it was a bubble.
> Global investors are not buying into the mania: the shares of companies listed in both Hong Kong and Shanghai are now 30% more expensive in the latter.
I'm quite confused by this statement -- if the shares on both exchanges are equivalent, this seems like an insanely good arbitrage opportunity. Are China's capital controls really tight enough to prevent Chinese nationals from finding a way to invest in the same stocks on the HK index for a 30% discount? And even if they are, I'm not clear why the Chinese government would do this -- it's like charging a 30% premium to domestic investors just for being Chinese.
Are China's capital controls really tight enough to prevent Chinese nationals from finding a way to invest in the same stocks on the HK index for a 30% discount?
The answer has to be yes - otherwise, as you say, it would be arbitraged away. It's still a bit leaky, but when it leaks it seems that investors much prefer to diversify into ownership of overseas property.
Why capital controls? Because China is more nationalist than globalist. It's also critical to keeping the industrial policy working by forcing local re-investment and preventing capital flight. Chinese growth depends on cheap money, which in turn relies on forcing people not to charge a risk premium for the percieved confiscation and rule-of-law risks in China.
I read a related analysis (can't recall where, sadly) which indicated that some speculators (as opposed to investors) actually preferred to speculate in Shanghai, as they expect the shares to bubble higher before they sell them on; if they speculated in HK, they'd just not make as much profit.
Obviously, there's an associated higher risk, but that's the game.
It's not capital control in this case, it's the different shares. The shares you bought in HK can not be sold in SH, and vice versa. When the company does an IPO, it will assign a percentage of the shares to SH and the other to HK. It will be fixed in that way. You'd better treat them as two separate holding companies listed on SH and HK, each owning a piece of the actual company.
I may be completely off about this, but isn't it the term suppose to be "going concern"? I thought I had discovered a phrase I didn't know, but then I did a Google search and the only occurance is this article.
That said, if China's market goes under it may be pretty gory. :)
It's a pun, playing on the well known phrase "going concern". It's a bull market, and people are going to get gored when it stops (which of course is something bad a bull can do to people), which is a concern. A "going concern" is some kind of viable enterprise, so by casting it as a "goring concern" they're alluding to the fact that the stock bubble does not look like a viable enterprise, as well as getting in a reference to bull markets and giving their prognosis. Puntastic.
Play on words... Extremely "bullish" market, lofty valuations, irrational exuberance, people are going to end up gored when some of these companies (300431, 283.HK, 566.HK etc) end up in dirt and no longer qualify as "going concerns".
While we're on the subject, when you say "isn't the term suppose to be", you actually need to say "isn't the term supposed to be". I've noticed that people have started pronouncing this wrong (they now say "suppoes" rather than "suppozed") and that's spread into the written form.
Similarly, people are also replacing the correct "used to" with "use to".
> A shift to monetary easing and fiscal stimulus—and expectations of more to come—help explain why the rally began. But the longer it continues, the more it looks like irrational exuberance.
The spark that started it all?
This is crazy:
> Credit Suisse estimates that 6-9% of China’s market capitalisation is funded by credit, nearly five times the average in the rich world.
[+] [-] smaili|10 years ago|reply
> A hotel group rebranded itself as a high-speed rail company, a fireworks maker as a peer-to-peer lender and a ceramics specialist as a clean-energy group.
I've heard of pivoting, but this goes way beyond that. Doing a complete 180 on what you're producing/selling and changing your name? That's both fascinating and scary at the same time. As a customer, how do you know whether the company you're buying from will still be around?
[+] [-] 88e282102ae2e5b|10 years ago|reply
[+] [-] pcrh|10 years ago|reply
[+] [-] xyzzy123|10 years ago|reply
So it's not really a "pivot" and I feel that the article is slightly misleading on this front.
E.g. for Kemian Wood see: https://zephyr.bvdinfo.com/version-2015528/FullEditorialNews...
This is quite common in Australia, I hadn't realised it was a thing in China until now.
In Australia there are fair number of zombie listings from mining / prospecting ventures that didn't pan out. Often they're wound back to basically being a P.O box. It is very, very common for tech companies to list by doing a reverse merger with a zombie.
See: http://www.afr.com/business/banking-and-finance/investment-b... for more details.
[+] [-] jdhawk|10 years ago|reply
[+] [-] kenny-log_ins|10 years ago|reply
[+] [-] davidw|10 years ago|reply
They also tend to be fairly 'practical' in their support for candidates. I recall some years ago when they absolutely laid into Silvio Berlusconi and recommended the left-wing candidate despite Berlusconi being, in theory at least, the more 'business friendly' candidate. They rightly argued that he was mostly just friendly to his own businesses.
So, yes, they are 'liberal' in the European sense, but not necessarily 'libertarian' in the US sense.
Edit: their about page is informative: http://www.economist.com/help/about-us#About_Economistcom
[+] [-] mrec|10 years ago|reply
I always find it a reassuring read, in the sense that well-written, well-researched, persuasive articles that I disagree with are a sign that I haven't been completely engulfed by my own little information bubble, but take it with a pinch of salt.
[+] [-] caoilte|10 years ago|reply
You should read the Economics of the Colonial Cringe. I think you'd enjoy it.
http://www.theatlantic.com/technology/archive/1991/10/-quot-...
[+] [-] pinaceae|10 years ago|reply
their stance on various wars is often questionable though. supported the second iraq invasion.
[+] [-] eyko|10 years ago|reply
"After double-digit growth for much of the past decade, sales have slumped" - you don't say... or perhaps they expect that rate of growth to continue without end? Yes, it was a bubble.
[+] [-] funkylexoo|10 years ago|reply
[+] [-] kcorbitt|10 years ago|reply
I'm quite confused by this statement -- if the shares on both exchanges are equivalent, this seems like an insanely good arbitrage opportunity. Are China's capital controls really tight enough to prevent Chinese nationals from finding a way to invest in the same stocks on the HK index for a 30% discount? And even if they are, I'm not clear why the Chinese government would do this -- it's like charging a 30% premium to domestic investors just for being Chinese.
[+] [-] pjc50|10 years ago|reply
The answer has to be yes - otherwise, as you say, it would be arbitraged away. It's still a bit leaky, but when it leaks it seems that investors much prefer to diversify into ownership of overseas property.
Why capital controls? Because China is more nationalist than globalist. It's also critical to keeping the industrial policy working by forcing local re-investment and preventing capital flight. Chinese growth depends on cheap money, which in turn relies on forcing people not to charge a risk premium for the percieved confiscation and rule-of-law risks in China.
[+] [-] EliRivers|10 years ago|reply
Obviously, there's an associated higher risk, but that's the game.
[+] [-] nichtich|10 years ago|reply
[+] [-] yc1010|10 years ago|reply
I thought non Chinese investors were not allowed to "buy in" anyways
[+] [-] mauricemir|10 years ago|reply
[+] [-] kordless|10 years ago|reply
That said, if China's market goes under it may be pretty gory. :)
[+] [-] EliRivers|10 years ago|reply
[+] [-] phyalow|10 years ago|reply
[+] [-] primo44|10 years ago|reply
Similarly, people are also replacing the correct "used to" with "use to".
[+] [-] AdmiralAsshat|10 years ago|reply
[+] [-] dmix|10 years ago|reply
The spark that started it all?
This is crazy:
> Credit Suisse estimates that 6-9% of China’s market capitalisation is funded by credit, nearly five times the average in the rich world.
[+] [-] phyalow|10 years ago|reply
[+] [-] unknown|10 years ago|reply
[deleted]
[+] [-] amelius|10 years ago|reply
[+] [-] mcdougle|10 years ago|reply