A few days ago, I talked about the dot.com days and how crazy, but predictably, how unsustainable those times were. Well, nineteenth years later in China the wild west of valuations is back, with the debut of China’s Nasdaq-style board, causing some of its components shares to skyrocket 520%, and with the lowest gain at the 84% level.
Yes, I know, the capitalization is quite low, around $70 billion, but those were just the first group of sixteen homegrown companies to enter, others will follow, which will increase the market value of that exchange. Interestingly enough this wild move comes, just like in 2000, at the end of an economic cycle, but then again, its China, where Bears go to a closed room to be “persuaded” not to sell shares, if the market devaluation begins to affect the overall sentiment. In any case its wrong, even to the global market, it gives the wrong idea that markets can make millionaires in a day, which in turn induces novice traders to ignore proper risk management.
Photo by Loic Leray.
