We have been very vocal about our recommendation to avoid Chinese stocks as a whole over the last five years. This is in contrast to a cacophony of bullish comments with respect to what they see as bargains on the Chinese exchanges. This time last year that cacophony was especially deafening.

Well, over 2013, the Shanghai Composite was one of the worst performing stock markets worldwide. And, to add further insult to injury, the Index has stumbled over the first two days of 2014 (weaker than expected manufacturing did not help yesterday).

Looking at the chart above, the last seven years have been dreadful for Chinese stocks. Yet, for most of that stretch, a large swath of strategists have crowed on about perceived values and the theory that because an economy is able to grow much more rapidly than the rates in the developed world, China should be a good place to invest.

Maybe when most investors feel they can trust the local accounting standards and the laws that protect shareholder rights, they might come in and set the Chinese market on a more bullish trajectory. That probably won’t be this year.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.

It was reported earlier today that Shanghai rebar prices were at a new interim low.

In terms of basic building materials, it doesn’t get much more basic than rebar (steel reinforcing bars placed into concrete to add strength).

Some analysts are beginning to use rebar prices in China to gauge the true level of development (since government numbers are hard to trust). Looking at the chart above, the recent trend in rebar prices does not look that promising, indicating that it may be a challenge for the Chinese economy to hit the 7.5% target set by the Party. Now, government officials may still resort to the old habit of severely fudging numbers (which was common in the Great Leap Forward) to please the “higher-ups” and make it look like the overall target is being achieved. However, as investors, we should take that into account.

Our recommendation for the last five years has been to avoid Chinese stocks. And, that’s still our recommendation.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.