Will China kill the world market ? Is recession around the corner?

Just saw the Shanghai Composite Index. Fearful to see that it is down 242.52 points (7% approx). So just thought to discuss something which is important for every stock market participant.


Today each one of us is using chinese products. As a business , if you have to purchase the raw material in bulk, you will probably approach the Chinese Manufacturers. Why? Because their products are cheap...In fact very cheap as compared to the Indian manufacturers. Hence buying less expensive raw material will probably expand your profit margin. Undoubtedly that is what a business is meant for.

But what happens to the Indian manufacturers when you don't buy from them? They lose their business. Their revenues start falling and of course profits too. Less domestic business means less national income.

But the question arises that why China is selling at such dirt cheap rates?
The answer is OVER PRODUCTION. They are bound to sell at lower prices. Their economic position has become very poor. They sell even lower than the Cost Price. They are in heavy losses but still they are selling. Hence for an Indian manufacturer, its like having a battle with a suicide bomber. Needless to mention that in this situation both warriors are going to die and no one will win.

So Why don't they stop producing the goods?
They can't.. Because their population will become unemployed which will followed by an immediate massive financial rampage. and by the way How long will china be able to survive on losses ? Ultimately their economy will die.

But Why chinese crash will have an impact on Indian market?
China is the second largest economy of the world and is acting like a pillar to the world economy. Nobody will be able to hold the falling roof if this pillar falls.

GDP List by IMF (Check Wikipedia)
1 United States 17,348,075
2 China 10,356,508
3 Japan 4,602,367
4 Germany 3,874,437

Conclusion: - One should remain very careful now. Media is creating a bullish hype. Sometimes they give sky targets like SENSEX touching 33000 (in next 12 months) / 100000 (in five years) etc. As a long term investor I am also bullish on Indian stock market but the world economy can completely kill our dreams. Dont over invest. Keep a good amount of cash in Hands.

Thanks
Guru Vachaal

 

@Parin Gala There are always stocks like INFOSYS, HCL, MRF etc that keep moving up even in bad times but 99% stocks get victimized. Hence it is important to stay careful.

Thanks for your comments.

 

I think Parin Gala deleted his post.

 

Very good analysis of situation. Very informative post. Keep it up.

 

yes , China banned shareholders with holdings of more than five percent in a company from selling shares in July as part of efforts to stem a rout that wiped trillions off market capitalisations. The ban will expire on Friday, triggering fears of a big sell-off by major shareholders.

 

In my view any loss to Chinese Economy is India's gain.So short term pain is welcome for long term gain. Western countries will eventually make Russia out of China.Good for long term world order

 

Any timeframe or index levels until which one ought to keep the good amount of cash in hand?

 

As a stock market participant, You should always be ready with cash in hand.

 

My question was only because you concluded your thread about ' will china kill the world market' with ' don't over invest. Keep a good amount of cash in hands'

So keeping a 'good' amount of cash in hand has nothing to do with the China woes is it?

 

yes sir. china cant grow for long time based on infra investment led gdp growth which is 40 % of economy.so china will definitely slow down.when it happen nobody knows.
that will be a good situation for india to become the most attractive investment with highest stable gdp growth rate. when india becomes fastest in gdp growth , india will not allow much investments from china as we have not so good relation with china as a nation and for security reasons. so china will be compelled to invest their funds with low gdp growth countries which will further reduce their gdp growth.i think its bad time for china ahead. so be cautios with markets.

 

Sorry it got deleted by mistake. New mobile. Feather touch Saw it just now.

Looks like a couple of people used this opportunity against me by "liking" it. Don't worry guys I am not running away anywhere nor I have the habit backing off from what I said.

Some Losers don't miss a single opportunity against me good to see I have some rivals so much jealous of me.

 

whoa! it's not always about you, liked his post because his posts made him look like a fool after your post was deleted because new mobile with feather touch

be my guest!

 

Anyways, what I wanted to say in that deleted post is that yes China will lead into Global slowdown if not recession. India will also have a tough time.

However stock specific approach is to be kept at all times. In a bad market there are out performers and in a good market there are under performers.

Therefore rather than being focussed in market and global conditions a stock specific approach has to be kept at all times.

 

@BombayBoy you can be my guest for sure. Anyways I wasnt as harsh as you in my thinking about guru ( didnt think he was being foolish) but did laugh at his flustered reaction. And hey senior and 'successful' members in here are entitled to think that its always about themselves. Its a different matter that they maybe lightyears away from building a portfolio like mine.

 

The biggest tragedy with online forums is that any ordinary person can get instant fame by posting a ''blockbuster'' portfolio as his own. And there is no way to confirm whether he really owns them.

 

Still a Smaller tragedy than some delusional members allowed to thrive in such forums who go around preaching some borrowed philosophies or elementary public knowledge and thinking themselves to be stars and 'fathers of investing'. Father's of investing with portfolios either not worth publishing or just too small to spend a breath on.

 

I am dying of boredom.... Somebody please publish something which is not elementary public knowledge.

@ parin gala : no offense ya.... Just stating my state of mind

 

Preaching elementary knowledge is better than creating nuisance through multiple fake ids

 

Those small portfolios are known as ''concentrated portfolios'' which only those guys have who know about the stock markets.

 

Ooh this one really hurt me........ Just fell off my chair laughing.

Surely you dont practice what you preach.... What does your supposedly genuine id say ' Om Shanti...... peace, Bliss, Prosperity to all ' .... Super fake!!!!!!

Now don't waste my precious time : i have a worthwhile portfolio to manage apart from other professional responsibilities..... Sorry you will now have some more idle time on your hand but don't bother to reply : for atleast i dont know what would happen to them since i gonna 'ignore you' through the outdated technology prevalent here. Thought i'd let you know this because i Didn't want you to have any delusional superiority complex not seeing reverts from me.... So kind of me na...

In the end : thought will leave you with an earlier post of yours made by you on my portfolio :

The sheer size of your portfolio makes a person like me have inferiority complex. I have only 4 stocks in my portfolio. Managing such a big portfolio indeed is a feat of its own kind which is not everyone's cup of tea. Maybe that's why everyone's speechless.

And hey Your new mobile, feather touch can prove handy once again... Don't worry a majority in here will still believe you.

Peace and Bliss to you.