Far Out Friday: Praying for better returns

Far Out Friday: Praying for better returns

Far Out Friday: Praying for better returns It seems that the Chinese government is prepared to try almost anything in order to bring calm to the markets — even getting university graduates to chant slogans of support for the country’s crumbling equities while receiving their diplomas at graduation.
 
At the beginning of ceremonies across the country, students will chant the following slogan in hopes it will bring good news to the Chinese markets: “Revive the A shares, benefit the people; revive the A shares, benefit the people.”
 
If the Chinese are being forced to pray for better returns it’s a sign that not only is there real threat of a stock bubble but also that the government may have abandoned any thoughts of government reform in order to appease investors who'vev lost the equivalent of 1.3 per cent of Chinese GDP.
 
“The market selloff is definitely the largest challenge that the new administration has faced,” said Victor Shih, a China expert at the University of California, San Diego. “He’s trumpeted reform for the past couple of years but a lot of so-called reforms have gone out the window with this dramatic…government intervention in recent days.”
 
Things have gotten so bad in China that many big supporters are wavering in their support. but not all. Ray Dalio’s hedge fund, Bridgewater Associates, recently came out with a note to clients suggesting the long-term horizon is still bright.
 
“Ray Dalio and Bridgewater believe that too much has been made of the shift in their thinking and want to clarify their thinking. ... The observations that were made simply noted that falling stock prices have a negative wealth and negative psychological effect,” Bridgewater wrote in note to the press. “When a classic stock market bubble (supported by unsophisticated investors buying stocks on a lot of margin) bursts, there are negative growth effects. Bridgewater’s view that China faces debt and economic restructuring challenges, and that it has the resources and the capable leaders to manage these challenges, remains the same.”