Chinese Stock Markets Are in the Middle of an ‘Unprecedented’ Slide

[F-22Raptor]

China stocks tumble again despite support measures

Chinese stocks opened down on Tuesday, taking no comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang's failure to mention the market chaos in a statement on the economy.

Before the market opened, Li said in comments on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 percent off Chinese shares since mid-June.

After a brief pause to the slide on Monday, the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen fell 4.8 percent in early trading on Tuesday, while the Shanghai Composite Index .SSEC shed 3.4 percent.

The ChiNext growth board .CHINEXTC, home to some of China's giddiest small-cap valuations, fell 5.1 percent.

In an attempt to halt the slide, China has arranged a curb on new share issues and orchestrated brokerages and fund managers to buy massive amounts of stocks, helped by China's state-backed margin finance company, which in turn has a direct line of liquidity from the central bank.

The official Shanghai Securities News reported on Tuesday that China's major insurance firms plowed tens of billions of yuan into blue-chip exchange-traded funds (ETF) and large caps on Monday.

China Life Insurance Co Ltd (601628.SS) bought a net 10 billion yuan ($1.6 billion) in index funds, while China Pacific Insurance Group (601601.SS) and other insurers each invested more than 1 billion yuan, the newspaper said.

That helped the indexes rise just over 2 percent on Monday, but the relief was shortlived.

Lei Mao, assistant professor of finance at Warwick Business School, said government measures to support the market distorted the allocation of funds and trading behavior and could create the conditions for further sharp falls.

"Even an optimistic investor should not participate in the market for now," he said.

Traders are increasingly unnerved by the unusually large number of Chinese companies asking for their shares to be suspended from trading, fearing that many of them are looking for excuses to sit out the market turmoil.

About a quarter of the roughly 2,800 companies listed in Shanghai and Shenzhen had filed for a trading halt by the close on Monday, and on Tuesday the Securities Times said another 200 had announced a suspension.

Investors were also reacting to news of tightened restrictions on futures trading on a major small-cap index.

The rapid decline of China's previously booming stock market, which had more than doubled in the year to mid-June, had become a major headache for President Xi Jinping and China's top leaders, who are already struggling to avert a sharper economic slowdown.

Even China's bullish securities regulators admitted that markets had become too frothy before they turned down, but the slide quickly showed signs of getting out of hand.

A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other "stability measures" did little to calm investors, many of whom have borrowed heavily to play the stock market.

In a series of announcements on Saturday, China's top brokerages pledged to collectively buy at least 120 billion yuan of shares to help steady the market, and said they would not sell while the Shanghai Composite Index remained below 4,500, a level last seen on June 25.

Underlining scepticism beyond mainland China about the sustainability of the measures, Hong Kong listed shares of Chinese brokerages took a beating on Monday.

In addition, 28 companies that had been approved to launch IPOs announced they had suspended their plans.

China stocks tumble again despite support measures| Reuters

 

[F-22Raptor]

Nearly 25% of Chinese stocks have stopped trading

The turmoil in China's stock market is so bad that some companies are calling it quits.

Over 700 Chinese companies have halted trading to "self preserve," according to the state media. That means about a quarter of the companies listed on China's two big exchanges -- the Shanghai and Shenzhen -- are no longer trading.

China's stock markets are in trouble. The Shanghai Composite Index has fallen over 25% since mid-June. The Shenzhen, which has more tech companies and is often compared to America's Nasdaq Index, is down even more.

The government has taken extraordinary steps to try to prevent further damage. The Chinese central bank made a surprise rate cut at the end of June. Then China's securities regulator stopped initial public offerings on the exchanges.

Over the weekend, over 20 of China's top brokerage firms publicly pledged to buy back stocks and funds in an effort to slow the downfall. The firms expect to spend at least 120 billion yuan (about $19.3 billion).

"The government is taking good care of the stock market," China's vice commerce minister said this week.

But investors clearly aren't convinced. China's stock market has been undergoing wild swings where it will open up as much as 5% and then end the day down that much or vice versa.

Both the Shanghai Composite and Shenzhen indexes fell again on Tuesday.

According to Bespoke Investment Group, China's stock markets have now lost $3.25 trillion. To put that in perspective, that's more than the size of France's entire stock market and about 60% of Japan's market.

While it's a top issue for China, few foreign investors have much exposure to these stock markets. The real concern for those outside China is an economic slowdown, not so much the stock market fluctuations.

"We reiterate that selling global risk assets on fears of Chinese 'contagion' driven purely by stock declines is a fool's errand," Bespoke wrote in a morning note.

Nearly 25% of Chinese stocks have stopped trading - Jul. 7, 2015

 

[F-22Raptor]

China Markets Fall Sharply Despite Fresh Help From Beijing

Chinese markets fell sharply Wednesday, even as Beijing scrambled to arrest a three-week stock selloff.

China has introduced fresh measures to restore investor confidence seemingly to little avail. Stocks and Chinese bonds traded offshore, even high-quality corporate bonds issued by top state-owned companies, are getting dumped. China’s yuan, freely traded in the offshore market, hit a four-month low against the U.S. dollar amid a dimming outlook for the world’s second-largest economy.

A spokesman for the China Securities Regulatory Commission, Deng Ge, described the current market mood as “panic sentiment.” In a statement, he said, “Irrational selloffs have increased greatly and that has led to a liquidity tension in the stock market.”

The Shanghai Composite fell as much as 8.2% at the start of trading Wednesday. The index is now down 4% at 3576.79. The smaller Shenzhen Composite fell 3.9%. China’s main stock benchmarks have lost more than a third of their value since highs in June.

Hundreds of Chinese stocks were frozen from trading Wednesday, with 1,287 companies halted. That represents 45.6% of the constituent stocks of the Shanghai Composite and Shenzhen Composite and $2.5 trillion of market capitalization, according to data from FactSet.

In Hong Kong, which has until recently fared better than the Chinese mainland, the benchmark Hang Seng Index dropped 4.2%, while a gauge of Chinese companies with Hong Kong listings, known as H-shares, plunged as much as 6.7% before easing losses to 5.5%.

China has put an arsenal of measures to work in recent days to stem the selloff that has wiped out roughly $2.4 trillion in value from China’s equities. On Wednesday, the China Securities Regulatory Commission announced that the China Securities Finance Corp., a commission unit that provides financing for margin trading, will increase purchases of small-cap stocks. The move follows an earlier pledge by the company to buy blue-chip shares to stabilize the market.

China’s central bank also said it would help ensure the China Securities Finance Corp. has ample liquidity to stabilize the market. The state-backed company may tap the interbank market, issue bonds, use mortgage financing and borrow from relending facilities, the People’s Bank of China said in a statement.

In the onshore market, the Chinese yuan hit 6.2094 per dollar, compared with 6.2100 as the market closed Tuesday. The price for the yuan in the offshore market, where it can trade freely, fell to as low as 6.2290 per dollar—the weakest level since March 18—compared with 6.2212 late Tuesday. China’s central bank fixed the yuan’s official rate for Wednesday at 6.1175 a dollar, a touch weaker than 6.1166 Tuesday.

Spot yuan trading in the onshore market has been 1.6% weaker than the reference rate in Wednesday trading. When the offshore rate trades weaker than the mainland rate, that typically indicates waning demand among non-Chinese investors for the currency. China’s central bank controls the onshore rate by setting a daily reference rate for the yuan, but allows it to trade 2% above or below that level. At the same time, the dollar rose to a five-week high against other currencies Tuesday, as investors seek safer assets amid China’s rout and uncertainty about Greece.

Investors also are selling Chinese bonds that trade offshore. “People lost confidence towards China’s credits. Everything is down. The riskier the bonds, the heavier they’re being sold. Property developers are having some of the biggest casualties,” said Frank Huang, fixed income trader at SinoPac Securities in Hong Kong. Bond yields of major property firms such as Agile Property Holdings Ltd. and Shimao Property Holdings Ltd. hit their highest levels in several weeks. Bond prices move inversely to yield.

While high-quality investment-grade bonds, including top state-owned companies, have been resilient in the past few weeks, these assets are also getting pressured, traders say. Yields of bonds issued by state-owned enterprises such as grid operator State Grid Corp. and oil giant Cnooc Ltd. have risen seven to 10 basis points Wednesday morning.

Inside China, investors seeking to keep their money out of risky stocks are flocking the onshore bond market. Benchmark 10-year Chinese government bond yields fell to 3.4% Wednesday from 3.6% earlier this month.

Over the weekend, Beijing suspended initial public offerings and made it easier for investors to borrow to buy stocks. China’s brokers also vowed to buy shares until the Shanghai Composite hits the 4500 level. Despite the recent tumble, China’s main stock index is up 72% over the past year and 10% since January.

Still, concerns are brewing that Beijing’s increasingly desperate measures to calm markets are building bigger risks into the country’s financial system, particularly a commitment from the People’s Bank of China to provide unlimited liquidity support to China Securities Finance Corporation.

“The rescue plan could potentially increase the systemic risk down the road,” analysts from Société Générale wrote in a research report. “Initially most of the stock market risk was with households, but with the rescue plan, systemically important institutions are taking up more risk when the market is still under immense downward pressure. Our biggest concern is that the progress of structural reform could suffer as the result.”

Worries about China’s faltering demand amid the stock slide are also driving down commodity markets, with copper hitting a six-year low on Tuesday. China is the world’s top copper consumer, accounting for about 40% of global consumption. Pessimism about China, coupled with worries about a supply glut, also sent U.S. oil prices to a near three-month low Tuesday.

Brent, the global oil benchmark, is down 29 cents at $56.56 a barrel Wednesday, after falling as low as $55.10 earlier.

“Fears about the risks to financial stability and the wider economy have contributed to negative sentiment toward commodities,” analysts from Capital Economics wrote in a research report. “The impact has been felt most in industrial metals, such as copper, where China is by far the most important consumer.”

Meanwhile, eurozone leaders set a Sunday deadline for Greece to come up with a new set of more stringent measures to avoid defaulting on the European Central Bank and exiting the currency union. While the leaders raised the possibility of some short-term financing to help Athens make a July 20 payment, many of the policy overhauls and budget cuts demanded were overwhelmingly rejected by Greek voters in a referendum last weekend.

The Nikkei 225 Stock Average declined 1.5% in early trading while Australia’s S&P/ASX 200 fell 1.7%. South Korea’s Kospi Composite was down 1.3.

Global bond markets rallied as investors sought haven assets in developed-country debt. Yields on benchmark U.S., German, and U.K. bonds hit their lowest levels in more than a month. On Tuesday, the International Monetary Fund warned of the risks of raising rates too early in the U.S., and called for the Fed to delay a raise until 2016. Concerns that the Federal Reserve would raise rates prompted a bond selloff in June, given concerns that higher rates would lower their outstanding value.

The euro also sank 0.5% against the Japanese yen as investors sought assets perceived to be safe.

China Markets Fall Sharply Despite Fresh Help From Beijing - WSJ

 

[cnleio]

China stock market was experincing a Economy War ... and the stock war still continue.

 

[cnleio]

Choose a good point, can buy some stock...

 

[Economic superpower]

Choose a good point, can buy some stock...

China in the 'capitulation' phase right now.