End of the China bull?

[waterbottle]

Chinese brokers to start buying ~$20 billion worth of shares

http://www.nytimes.com/2015/07/05/business/fund-in-china-aims-to-stabilize-stock-markets.html?_r=0

 

[notting]

They were doing the buying in the morning they have switched to the afternoon for the moment. Maybe not, back in this morning.
It's a little troubling that they were ok with letting the market decline for 5 years but are not able to tolerate genuine volatility at this time.

The good news is that the authorities in Beijing clearly are betting everything on a stock rally that's hasn't come: Stocks just sustained their biggest three-week loss in more than two decades. That's despite moves last week to loosen margin lending, cut interest rates, reduce reserve requirements, direct the state-run media to churn out don't-panic articles, you name it. Over the weekend, the government even suspended initial public offerings and set up a market stabilisation fund.

Margin traders, who increased their leveraged investments nine-fold in the last two years, to about $322 billion from $35.7 billion, have been rushing to close those positions for a record nine consecutive days. And the Shanghai Composite Index's plunge below the symbolic 4,000 level signals even more selling. Further, a slide in iron-ore prices last week suggests that Chinese demand is slowing more sharply than the government is letting on.

All of this indicates that the government's recent stimulus efforts aren't working. At a time when Xi's team should be strengthening China's financial system, they're just making it more fragile. What's needed are decisive steps to shore up domestic demand, not more market froth.

 

[CanOz]

They were doing the buying in the morning they have switched to the afternoon for the moment.

What a colossal amount of margin debt though...

08:54(CN) As of Jul 6th, China total margin debt CNY1.77T v CNY1.91T as of Jul 3rd (record 11th consecutive decline, largest daily decline) - Source TradeTheNews.com

 

[notting]

Thankfully we were not concerned about a property bubble prior to this stock market route because now -

Authorities are tweaking rules aimed at supporting equities included this shocker: Homes are now acceptable collateral for borrowing to buy more stocks. Perhaps the least of the too-many-to-list problems with this idea is that property is difficult to liquidate when assets crash. The biggest is that China is sowing the seeds of a third financial time bomb to match its debt and stock bubbles.

The wording of China's new rules - and its list of "other assets" that can be used as collateral - will force brokers to become experts in valuing everything from property, to antiques, to art.

Perhaps they decided to implement Varoufakis economics - If your going to go, go hard.

Leverage everything against every other thing and just blow the crap out of it. They will have to forgive our debt and in the meantime we have built the country and shuffled our money into Ausi international apartments and Alibaba.

 

[skc]

Why ban short selling when you can ban long selling... this Chinese market is gettting beyond a joke.

http://www.afr.com/markets/equity-m...spended-as-beijing-intervenes-20150707-gi6p2s

Trading has been halted in more than 25 per cent of Chinese listed shares, in what appears to be the latest government-backed attempt to shore up the country's plunging equities markets.

The suspension of more than 700 mainly smaller stocks listed in Shenzhen since June 12 failed to lift the markets on Tuesday morning.

Stock market services company, Wind, said the majority of the companies had suspended their shares ahead of major news announcements, while the others were embarking on a restructuring.

http://www.afr.com/news/world/asia/...told-dont-sell-caijing-report-20150706-gi68hu

Independent media group Caijing reported the National Social Security Fund ordered the selling ban on Monday, which it said was communicated to fund managers during a series of phone calls.

It said they were ordered "not to sell a single share" by senior management. The state-pension fund had $159 billion of assets at the end of last year, split between bonds and equities.

 

[sinner]

Sentiment from the mainstream media seems horrible (who are suddenly experts on the Chinese market). Seems like a great environment for long setups...

 

[skyQuake]

Sentiment from the mainstream media seems horrible (who are suddenly experts on the Chinese market). Seems like a great environment for long setups...

It seems whats happening right now is retail selling and insto buying.

Retail liquidating margin loans, insto (forced at gunpoint) to buy stock...

I would be a lot more comfortable with buying if the govt isn't pulling new policies out of their ar$e every hr.

In the A-shares, only about 30% of the companies are trading at the moment. Rest are limit down or halted :S

 

[sinner]

Here are some P/E ratios (Bloomberg sourced):

S&P500 (USA): 18.22
TSX 60 (Canada): 18.75
Stoxx 50 (Europe): 19.29
CAC (France): 24.31
DAX (Germany): 17.58
FTSE100 (UK): 20.56
S&P ASX200 (Australia): 20.02
Nifty (India): 22.29
Nikkei 225 (Japan): 23.09
KOSPI (Korea): 17.61

Meanwhile:

Shanghai Composite (China): 19.28
CSI300 (Shenzen, China): 17.47
Hang Seng (Hong Kong): 10.37

 

[skc]

Sentiment from the mainstream media seems horrible (who are suddenly experts on the Chinese market). Seems like a great environment for long setups...

Mainstream media in Oz or in China?

It seems whats happening right now is retail selling and insto buying.

Retail liquidating margin loans, insto (forced at gunpoint) to buy stock...

I would be a lot more comfortable with buying if the govt isn't pulling new policies out of their ar$e every hr.

Agree. They are definitely exacerbating the panic. Halting trading really is such a dumb move. The natural response when the shares eventually come out of the halt is inevitably panic selling...

Or may be the Chinese government can make-whole every investor (gambler) by nationalising every listed company at the investor's purchase price. There you go... the ultimate put option.

 

[McLovin]

Ease the restrictions on Chinese on gambling in Macau, stock market problem fixed.

 

[Uncle Festivus]

Interesting. How long till this flows on to Sydney & Melbourne real estate prices....? Already hitting the $AU.

Preliminary results from the China Household Finance Survey
•31.5% of respondents plan to reduce their stock holdings
•12.3% said they plan to increase their stock holdings
•Remaining saying they do not plan to change their holdings
•For Q2 4.8% of stock investors bought homes, compared with 2.3% recorded in Q1
•Of those who bought property, 70% came from households that have made money in the stock market.

It's taken longer than I thought but the inevitable has just started. Nothing is 'contained' anymore.

 

[notting]

•Of those who bought property, 70% came from households that have made money in the stock market.

You mean that's what they wrote on the form. Reads better than 'unlimited profits from my state backed labor camp.'

 

[MARKETWINNER]

Over priced markets and assets including currencies and commodities are adjusting to the correct prices now. China is not exception. Those days Analysts ignored Japan and talked about Asia Ex-Japan. I am sure now they will talk about Asia Ex-China. We should see sell off in gold next. It could be double whammy for some countries. However there will be winners in every situation.

 

[waterbottle]

Interesting. How long till this flows on to Sydney & Melbourne real estate prices....? Already hitting the $AU.

Preliminary results from the China Household Finance Survey
•31.5% of respondents plan to reduce their stock holdings
•12.3% said they plan to increase their stock holdings
•Remaining saying they do not plan to change their holdings
•For Q2 4.8% of stock investors bought homes, compared with 2.3% recorded in Q1
•Of those who bought property, 70% came from households that have made money in the stock market.

It's taken longer than I thought but the inevitable has just started. Nothing is 'contained' anymore.

I think it's all in the details. How much money did they make? Is the stock market their only source of income? This article from macrobusiness shows that the average household has relatively minimal exposure to stocks compared to their huge cash savings.
Although I would like it to be the case, I doubt that Chinese stock market crash would directly result in an Aus house price crash - whether it will do so indirectly is unknown.

Meanwhile the SSE has managed to pull out of its nose dive for the past two days following its announcement last week. If this keeps happening then maybe the bottom has been reached.

 

[satanoperca]

More like it is just taken a breath before the next dive down deep.

Coming weeks will show it true direction.

 

[Uncle Festivus]

We have arrived, the cycle is complete - all markets are centrally controlled now.

The problem now is what happens when even these markets get out of the control of the 'controllers'?

The exit door will be soon be crammed with over leveraged trend chasers that some will have to go to the barbers instead - to get a haircut. And not just a #1, this is the full skin head. That includes central banks, notably the ECB.

Bond volatility is causing some major accounts to be seriously trimmed. Dealers will want more collateral. A global sized negative feedback loop has started that the fat controllers have lost control of.

 

[notting]

The problem now is what happens when even these markets get out of the control of the 'controllers'?

It collapses 9% on the open like a bullet (even with 25% of stocks suspended from trading (artificially holding value)).

Perhaps dumping State Owned equities on the market causing the initial 6% drop from the top dented 'the peoples' confidence somewhat. Especially as they did it without flagging it or any kind of warning. The news of it came out of Hong Kong, a few days after the Chinese communist Party did it.

 

[skyQuake]

China CSI 300 futs: July trading at a 5% prem to Sept LOL

 

[notting]

And before the Chinese Communist party dumped a big chunk of it's holdings onto 'the people' -

On April 21, People's Daily, the mouthpiece of China's ruling Communist Party, made a bold prediction about the country's benchmark stock index.

The Shanghai Composite had just gone above 4,000 points, and investors were pouring money into the market. Brokers were opening four million new trading accounts a week to meet demand. The newspaper proclaimed the bull market was "just beginning."

They got away with that kind of crap for decades in the property market. It's a bit harder to propaganda to the stock market.

 

[CanOz]

It collapses 9% on the open like a bullet (even with 25% of stocks suspended from trading (artificially holding value)).

Perhaps dumping State Owned equities on the market causing the initial 6% drop from the top dented 'the peoples' confidence somewhat. Especially as they did it without flagging it or any kind of warning. The news of it came out of Hong Kong, a few days after the Chinese communist Party did it.

Do you have a link to that? Sounds like an interesting story.