Fat Dragon has his own modest proposal to settle an issue much closer to home in China – the doggedly dysfunctional local stock market and its own over-population of undernourished companies. It won't get the headlines earned by Mr. Swift's sardonic pamphlet, but it is just as juicy and controversial, at least in policymaking terms.
Local gamblers will have seen that the domestic bourse has had a little up-tick lately, a matter of great joy after a miserable 30-odd months of flat turnover and low prices.
But not every downpour will end a drought, and there are many reasons to think that the surge in prices in recent months will do nothing to provide a platform for steady future growth.
The reason lies in the quality of the 1,290-odd listed companies, most of which offer little value at all for investors, because they only gained access to the market through the connections of their local authorities.
With the government bringing the worst of the bull-market excesses to heel, most investors have recognized this, and have started to steer well clear of all but about 180 companies on the Shenzhen and Shanghai exchanges.
This flight-to-quality can be easily illustrated steered by looking at valuations. The top 10 companies in terms of market capitalization now make up nearly a quarter of the market, about double their contribution of five years ago. And about 70 of the nearly 1,300 listed companies have market caps of more than US$1bn. At the same time as investors have bought these big-cap stocks – the so-called blue-chip state enterprises (no, it's not an oxymoron) – they have dumped the rest of the market. Nearly 1,000 are valued at less than US$400m, including 648 at less than US$200m, nearly double the number of a few years ago. It was when he was contemplating this "tale of two markets" that a light went off in Fat Dragon's head. If we have two markets, why not make two markets?
First, put the best 200-odd companies on the main board in Shanghai. And with Shenzhen constantly whining about how it is being left behind its politically-favored rival, shut them up by given the southern city's burghers the rest of the companies (more than 1,000) on a separate exchange. The genius of this plan is that China would finally get a real stock market with good companies in Shanghai, and also get the long-awaited "second board" in Shenzhen for speculative plays. But Fat Dragon is not holding his breath. His own modest proposal probably has as much chance of being implemented as Mr. Swift's.
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