Excessive Irrational Exuburence
July 26th 2007 14:10
It is well understood that sharemarkets are not entirely information efficient and we can live by that but you really have to ask what is going on when you see investment activities that are beyond comprehension.
The Standard reports:
"On their second day of trading, units of the HSBC China Dragon Fund (0820) soared 41.5 percent on heavy turnover, driven by the irrational exuberance of foreign funds and asset managers toward the A-share market, analysts said."
[...]
"The fund units closed at HK$16.98, up HK$4.98 from their trading debut close last Friday of HK$12, representing a jump of nearly 70 percent from the initial public offering price of HK$10.
"This is totally crazy. It is irrational exuberance," said Fulbright Securities general manager Francis Lun Sheung- nim. "The fund has not even started to do any investing, and [the units] are skyrocketing like magic. All they have now is just cash. It is irrational." Lun expects the unit price of the fund to correct in the near future.
"Without knowing the components of the fund, people just putting the money in, I don't think it's rational," said Taifook Securities executive director and head of research Marco Mak.
"Without any fundamental support, I can't see why the upside is justified."
The catch and keyword here is 'instituitional investors', supposedly to be professionals and experts in making informed, rational and optimal investment decisions. Nevermind the non-existence assets or securities, it seem that these professionals have been promoted to hold the crystal balls.
When you start hearing newspaper boys giving out stock tips, it is the time to get out of the market. But what do we do when we hear these 'fund and asset managers' are puting the cash on something that does not exist yet?
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Stick to the facts
Excessive Exuburence
The Standard reports:
"On their second day of trading, units of the HSBC China Dragon Fund (0820) soared 41.5 percent on heavy turnover, driven by the irrational exuberance of foreign funds and asset managers toward the A-share market, analysts said."
[...]
"The fund units closed at HK$16.98, up HK$4.98 from their trading debut close last Friday of HK$12, representing a jump of nearly 70 percent from the initial public offering price of HK$10.
"This is totally crazy. It is irrational exuberance," said Fulbright Securities general manager Francis Lun Sheung- nim. "The fund has not even started to do any investing, and [the units] are skyrocketing like magic. All they have now is just cash. It is irrational." Lun expects the unit price of the fund to correct in the near future.
"Without knowing the components of the fund, people just putting the money in, I don't think it's rational," said Taifook Securities executive director and head of research Marco Mak.
"Without any fundamental support, I can't see why the upside is justified."
The catch and keyword here is 'instituitional investors', supposedly to be professionals and experts in making informed, rational and optimal investment decisions. Nevermind the non-existence assets or securities, it seem that these professionals have been promoted to hold the crystal balls.
When you start hearing newspaper boys giving out stock tips, it is the time to get out of the market. But what do we do when we hear these 'fund and asset managers' are puting the cash on something that does not exist yet?
---
Related Posts
Stick to the facts
Excessive Exuburence
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