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

[Hamartia Antidote]

China Futures Exchange Halts Some Short Sales, Reuters Says - Bloomberg Business

"China’s financial futures exchange has checked stock-index futures trading by 38 foreign institutional investors and it didn’t find “large scale” short selling activities in the market, it said in a statement Wednesday. The exchange started the investigation after a market rumor that foreign institutions including Goldman Sachs Group Inc. shorted A shares though futures, the statement said. Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, declined to comment."


-------------------------------------------------------------

Sorry Goldman is not the culprit....start finding somebody else to point your fingers at.

 

[Spectre]

Officially, GDP growth is expected to remain at 7% this year, in line with the government’s target, but many analysts say that official figures overestimate actual growth and it is in fact nearer 3%.

Stuart Kirk, a strategy analyst at Deutsche Bank, queried why regulators eased lending rules this week hinting that its been done to boost up GDP growth.

He said: “After all, shares are still up 90% since the lows in 2013 and valuations remain frothy. The reality, however, is most investors are in the red – in fact, it is likely no money has been made during this equity boom whatsoever. The reason is because peak inflows occurred just before the recent selloff; money lost by latecomers is greater than gains made by earlier investors.”

More than 20m trading accounts were opened between mid-April and mid-June to invest in the rising market and it is these accounts that have seen the biggest losses, he said.

A prolonged slump could disrupt Communist party plans to use stock markets to make China’s state-dominated economy more productive. The party wants state companies to raise money through share sales to reduce debt and hopes they will compete harder if they have to answer to shareholders.

Officially, GDP growth is expected to remain at 7% this year, in line with the government’s target, but many analysts say that official figures overestimate actual growth and it is in fact nearer 3%.

Stuart Kirk, a strategy analyst at Deutsche Bank, queried why regulators eased lending rules this week hinting that its been done to boost up GDP growth.

He said: “After all, shares are still up 90% since the lows in 2013 and valuations remain frothy. The reality, however, is most investors are in the red – in fact, it is likely no money has been made during this equity boom whatsoever. The reason is because peak inflows occurred just before the recent selloff; money lost by latecomers is greater than gains made by earlier investors.”

More than 20m trading accounts were opened between mid-April and mid-June to invest in the rising market and it is these accounts that have seen the biggest losses, he said.

A prolonged slump could disrupt Communist party plans to use stock markets to make China’s state-dominated economy more productive. The party wants state companies to raise money through share sales to reduce debt and hopes they will compete harder if they have to answer to shareholders.

 

[TaiShang]

Now China's citizens have savings habit of old Chinese custom, saving for a rainy day; and so the Chinese government too has a good savings behaviour. So China has a savings rate of over 50% compared to the US of about 17% while riding a credit burden of fantastic proportions. So when looking at a country's financial fabric, westerners equates China society with US society and therefore is panicked about Shanghai stock market boom and bust.

They forget that the stock market is not a real wealth creation domain over long term. It is short-term able to make wealth for those who exit on the high, like a casino. So I do expect there will be ups and downs in Shanghai stocks, as a learning curve for Chinese private investors. We should also factor in the fact that, at the moment, Chinese consumers are a lot more activist and reactive than in the west. So the boom and bust cycle will be a lot more pronounced. The common citizen of China is most likely engaged online a lot more than even myself. They are playing "stealing veges", checking prices in appliances, cosmetics, sending angry posts to public forums, gossiping about the affairs of movie stars and famous people, checking stock tickers, house prices, and planning vacation the next Golden week. So any tidal wave on stock exchange is nothing compared with the New Years and Golden Week traffic jams.

So China's stock exchange authorities are clamping down on over-leveraging with margin buying of stocks. Meanwhile loosening money [still not like the money printings of Japan and US] is targeted at supporting the small and medium businesses in the overall restructuring of the economy to higher techs.

And the most uninformed statement by western "experts" is their harking at the "shadow banking" as a monolithic something "bad" without knowing the different parts of this informal banking network in Chinese society for millennia. Li Keqiang is trying to help the traditional mutual lending private system becoming more formalized and enlarged to help the small and medium businesses. That part of the shadow banking will exist and be larger with new micro-banks, online banks now created and blessed.

There is a lot more going on than seem on the surface:

http://www.ft.com/cms/s/0/23dcc148-2152-11e5-aa5a-398b2169cf79.html#axzz3elINRirn

"The World Bank has removed a chapter from a report on China’s economy issued on Wednesday that called for urgent steps to reform the country's "distorted" financial system, saying it had not been properly reviewed before publication.

The incident risks heightening tensions between China and the western-dominated World Bank and International Monetary Fund, even as China launches its own development bank seen as an attempt to create parallel institutions over which it can exert greater control."

 

[Hamartia Antidote]

This is the result of several factors:

-poor accounting standards (fraud)

-poor regulation (fraud, allowing investors to take risks unsuitable for their risk profile)
.

Also keep in mind Joe Kennedy's wisdom before the 1929 crash...
He said something like "I decided to sell when the shoeshine boy started giving me stock advice. When the ordinary man is speculating on the stock market...you know it's time to get out".

 

[Aepsilons]

Also keep in mind Joe Kennedy's wisdom before the 1929 crash...
He said something like "I decided to sell when the shoeshine boy started giving me stock advice. When the ordinary man is speculating on the stock market...you know it's time to get out".

In that case, its going to be a great season to be buying properties.....

 

[Hamartia Antidote]

In that case, its going to be a great season to be buying properties.....

Yep, he sold right before the crash and was worth $4M ($54M in today's money) 6 years later after buying up real estate he was worth $180M ($3.1B)

 

[walle990]

simply a correction, more drops to follow. the A-share composite rose 150% in under 1 year, to its highest point in mid June.

 

[Aepsilons]

Yep, he sold right before the crash and was worth $4M ($54M in today's money) 6 years later after buying up real estate he was worth $180M ($3.1B)

After ANY crash, its always the best time to buy properties...

 

[Icewolf]

After ANY crash, its always the best time to buy properties...

Until another crash happens....

 

[Aepsilons]

Until another crash happens....

Then buy more properties at cut throat prices...


Landlordism 101

 

[Icewolf]

Then buy more properties at cut throat prices...


Landlordism 101

How, all the property you bought before will be worth pennies

 

[Aepsilons]

It's an investment. Wait till the cycle ends and property value rises again; sell when it's right.

 

[Icewolf]

It's an investment. Wait till the cycle ends and property value rises again; sell when it's right.

That might be true for big investors or holdings...

Not true for anyone trying to make their way up in life through investing in stocks... You'd be on the streets after a 2008 like crisis...

 

[Aepsilons]

2008 wasn't even that bad, lol. And the U.S. Economy recovered by 2012. Don't you know that unemployment in the U.S. Is less than 5% now? Below pre-2008 levels actually.


Let's get American take in this.

@LeveragedBuyout @Peter C @Syed.Ali.Haider @MastanKhan @AMDR @F-22Raptor

 

[Icewolf]

2008 wasn't even that bad, lol. And the U.S. Economy recovered by 2012. Don't you know that unemployment in the U.S. Is less than 5% now? Below pre-2008 levels actually.


Let's get American take in this.

@LeveragedBuyout @Peter C @Syed.Ali.Haider @MastanKhan @AMDR @F-22Raptor

Lol you should tell that to the people who couldn't afford to pay their mortgages and went for selling their house but whoops found out it's only worth 1/3 of the price you bought it for and ended up on the streets

And I know about unemployment levels , I was using that as an example