Chinese VANITY

I have dedicated the initial part of 2016 to opening on the subject of the weaknesses of the Chinese Brand Building Mentality.

BAZINGA !!! As Sheldon Cooper of Big Bang (also equally descriptive of this "circuit breaker" fiasco here) would exclaim on the 2016 welcome to the Chinese Stock Market. Its brand new just introduced, starting from 2016 circuit breakers had kicked in twice already, stopping trading on two days out of the first four trading days of the year. A 50% record !

Surely this phenomenon is far more deserving of attention at this moment than Brand Building. Though both topics, Brand Building and Stock Market Curbing fiascos have common roots in certain flavours of Chinese Vanity. 

This is a clear example of the authorities' blatant "decision making" without proper research and paying attention to the peculiarities of the Chinese Stock Market.

NYSE has the 7, 13, 20 rule and the Chinese probably felt we looked better (or are better) with 5, 7, just out of thin air.

A seasoned, well tested and learned market has a wider tolerance band than an immature and wild market.

All nascent markets have to stumble around and put up with the wild vagaries of their growing pangs. Particularly, the temperament of the shrewd Chinese towards punting instincts and quick profits.

When the tolerance band is too narrow, there is no incentive for the market optimists to come in as a position taken may be trapped by the cessation of trading in a short while. There is no sufficient leeway to unwind intraday trades and overnight positions carry higher risks. With the optimists staying out, the pessimists will panic even more and trigger the curbs.

It will definitely be a doubling down hammering the market ! 

If you have to have a market, have a market and don't strangle it with tight curbs.

Fortunately, the authorities had the good sense to suspend the curbs as of today and let's see the effects.

A more feasible threshold for curbs on the Chinese Stock Market to start with would be the simple 10, 20, 30 percentages rule along the same restriction conditions as NYSE's 7, 13, 20 respectively.

There is always danger in reinventing the wheel. Where the Gurus have shown the way, why try to be a smarter Alec ???

Some of the observations garnered here will help me illustrate better the subject of Chinese Brand Building later on.