To Invest In China's Bull Market, Turn Off Your Brain

Here's an opinion piece by Wu Xiaobo that starts off discussing the insanity that is Baofeng's stock price and goes on to provide some good anecdotes. When Baofeng was limit up 20 times in a row, he received several phone calls from people asking him to explain what was up with the market. After the 35th limit up day, they suddenly became very quiet.
This is a collective psychological breakdown after the rational defense line has been breached, caused by extreme excitement leading to the choking of thought.
He goes on to say that at best, Baofeng would rank behind 200 other Chinese Internet companies and yet its market cap exceeds that of Youku (YOKU),
Chinese investors "love" of Baofeng can not be explained by any theory or model.
Reason - if it really exists, in the face of the daily limit up has completely passed out. Sparkling first 35 daily limit, the "suspect" itself becomes meaningless, rational analysis gives way involuntarily coerced type impulse, all reactions are fermented into profit-instinct: Who will be the next Baofeng, and will that company be me?!
Lest you think Baofeng is the only example of deranged behavior, there's more, such as Shanghai Duolun (600696) shifting from real estate to P2P lending, having only changed its name and experiencing limit up gains for two straight days. (ZeroHedge covered it in Chinese Stock Bubble Now Plumbing Depths Of Human Stupidity.)

Then there's Suning, a big box retailer struggling to make it. Two years ago the company tried an online push, but found it started cannibalizing store profits: China's two electronics retail giants take different routes to survival
In February 2013, Suning laid out plans to achieve sales growth of both its actual outlets and online store. It has expanded the product lines it carries at its online shop, Suning.com. Thanks to such efforts, its online retail sales soared 43.9% on the year to 21.89 billion yuan in the year through December 2013, which accounts for 20.8% of its total sales of 105.29 billion yuan.

However, it turned out that the same-price strategy had serious side effects. With its online store, the company has been able to offer lower prices as the operation demands less labor and other costs. But Suning's physical shops had to bring their store prices down to the same level with the online store, putting a heavy squeeze on its earnings.
It was still struggling at the end of 2014: Mega retailers struggle to survive, but the company made timely investment in October 2014: Suning, Hony to Invest $420 Million in China Video Site PPTV.
Nanjing, China-based Suning will pay $250 million for a 44 percent stake in PPTV, making it the video company’s largest shareholder, according to a statement handed to reporters at a press conference in Shanghai yesterday.
Result: the "online video" Suning's (002024) market capitalization exceeded that of the world's largest real estate developer by market cap, Vanke, after shares zoomed from a little over 8 yuan to 20 yuan before pulling back recently.

Back to Wu Xiaobo:
At least eight companies announced reorganization failures, the market took "advantage of this opportunity", continuous daily limit up.

"Sina securities" reported an anecdote: A new female investor in the market for less than year, misheard her broker's recommendation for Chinese Universe Publishing & Media (600373) and bought Beijing Chinese All Digital Publishing (300364) instead [中文传媒听成了中文在线], she dumped 300,000 yuan to buy 5000 shares, just two months later she doubled her money.
The stock she bought is up over 1000% since it IPO'd in January 2015. What's funny is that in the past few days, the book company has gone vertical too, up 50% in the past couple of weeks. Why did the stock suddenly surge? Well it turns out this company is China's most undervalued Internet company. How'd a book publisher manage that?

From July 2014: Bull or Bubble? How to make sense of mobile gaming M&A activity
And more randomly, traditional media or film companies in China are also spending big with Chinese Universe Publishing & Media buying Elex Tech for $434 million
Another timely investment.

Back to Wu Xiaobo's article:
"China Securities News" quoted a senior fund manager, he announced that he had abandoned using his brain, "In the capital market, money is the most intelligent, we respect the market, therefore, it's the 'no brainer buy,' force yourself to buy!"

No one would deny that China's capital market is currently in a parabolic path of irrational exuberance, many people are wondering when the turning point will come, but more people were provoked by this parabola into screaming, ignoring the dangers and investing in this market. This is a crazy scene, unprecedented, never before seen in the world unprecedented - a single day's trading volume of 3 trillion yuan is the equivalent to six times the previous world record.

Yicai: 中国正经历一场资本泡沫运动

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