25 June 2013

China Stock Market Collapse?

Yesterday we had experienced another terrible experience in China Stock Market with Shang Hai Composite Index dropped more than 6% in single day. According to the experts out there, this was due to the rising concerns on China's liquidity crunch as the Inter-Bank Loan Rate spike to more than 10%, which could lead to another financial crisis in China.

Although China’s central bank could step in to add cash to the system, it has largely been holding off. "Currently, the overall liquidity in our banking system is at a reasonable level," the People’s Bank of China said in a statement Monday.

As I am new to this market, so I could not have any good recommendation here. What I wish to note it down here is to express my feeling in this year.

Starting from beginning of the year, I thought that the stock market was already in a high level, until I realized that I was wrong in May. At that point of time, I already reduced my position to about 50% from about 90% beginning of the year. As I am not rely on the income from stock market, so there is little room for my to make mistake. So if we look at the current situation, the China stock market actually still above the year beginning level. So it is still early to say that China has entered bear market.

If and only if we believe in long term investment, then it might create a chance for us to enter the stock market. To me, I am still cautiously optimistic in long term growth in China economy as well as the emerging market. With hot money now flows back to US, I believe that there will be a volatile market for us.

Anyway, I am a bottom-up approach investor, so I will just keep continue to uphold my investment philosophy - that there is no point for us to keep cash in long run. We should always find opportunities in the stock market. You can be patience, you can just do nothing, but please do not forget to monitor closely the news that may bring fortune to us.

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