Here’s an interesting short-seller to cheerleader story.
MarketWatch reports that Jon Carnes, a noted short-seller famous for blowing the whistle on several U.S.-listed Chinese stock frauds, now sees the Shanghai Composite going all the way to 8000 by the end of 2016. His logic? A combination of the PBOC’s take on the Greenspan put and the “Beijing’s got your back” rally:
“[Investors] are discovering, for the first time, the Chinese version of the ‘Greenspan put.’ Like Alan Greenspan in the 1990s, the Chinese government has now shown that it will drastically intervene to support the stock market,” he said
“I know a lot of native Chinese investors. They all fully understand that their markets are speculative, that fundamentals don’t really matter, and that investing in Chinese stocks is akin to gambling. They only seek to ‘go with the herd,’ following the trend in the market and constantly gauge the level of government support and initiatives,” he said.
If all else fails, Beijing will devalue the yuan as a last resort and that in turn will “set the stock market on fire.”
Mighty strong words. As for the bears, the Eos Funds’ manager says that some of them could end up in a world of hurt should they go against the Chinese market:
“Chinese securities regulators will continue to limit and or threaten short sellers with jail time whenever necessary to show their ‘support’ for the market, and to bolster the public’s admiration of the regulators’ authority as the protector of the investing masses.”
Sounds familiar?
Photo: Danijel James