End of the China bull?

[sydboy007]

1. If those foreign companies who were exposed to China go under, why would that affect China's bull run or ability to get back onto one?
2. $1.3 trillion doesn't seem like a large amount of money, given that it is spread over so many institutions and countries

Really, it's amazing the lengths to which the CCP have kept their markets afloat: Rate cut + drop in reserves over weekend; force brokers to start buying; ban selling of ~30-40% of market by major shareholders for 6 months; ban any negative talk about the sharemarket. All this earning them ~10% increase in the space of a week!

1. Slow growth in export market slow growth in China
2. Who has the risk? Would likely end up with a Lehman brothers style freezing of the markets. Who will lend to who? Who has the bad Chinese debt?

Factor in that the Chinese would also suffer a form of credit crunch. You'd definitely see a further increase in capital flight from the country - $500B annual at Q1 this year mitigated by the suprlus, but still a net loss of FOREX.

In a way the PBOC is loosing control of interest rates. They can't do anything to confirm a falling CNY or the hot money flows out faster. They can't increase rates to slow the hot money as they need a lower CNY not a rising one. They can make further reductions in the RRR which will slowly reverse some of the FX sterilisation they did in the boom years, but then you can start getting the lending practices that got China in the mess they are, and it's not so sensible to drain bank reserves when bad debts are rising. Continued net outflows will likely place significant pressure on asset values, depending on how they are funded, and on productive growth, if they are funded by private sector disinvestment.

 

[notting]

2. Who has the risk?

I'm hearing a lot of it is in the shadow banking system.

 

[shouldaindex]

China will be fine, slowing to 5% GDP growth in the next 5 years.

No idea what their stock market is doing though.

 

[waterbottle]

1. Slow growth in export market slow growth in China
2. Who has the risk? Would likely end up with a Lehman brothers style freezing of the markets. Who will lend to who? Who has the bad Chinese debt?

1. IIRC, there was a slow down in exports during the GFC but that didn't stop China from achieving 7% growth. The current situation isn't as severe as the GFC (or maybe we haven't waited long enough).
2. The risk is carried by those who invested in China. We could end up with a credit freeze, but what's the likelihood of that? And how will that even affect China when they are printing their own supply and manipulate every facet of their economy?

 

[notting]

China Lies​

According to the NBSC, from 2000 to 2011 private housing CPI rose by 8 percent. Let me emphasize very strongly that is not 8 percent annually but 8 percent total in twelve years. In a period when official real GDP growth was averaging around 10 percent annually, official housing price inflation was a mere 8 percent total. To provide some perspective, research covering a similar time period found total real estate asset price inflation of 200-300 percent. One recent paper by the same team found “real house price growth has been high, averaging 10 percent per annum since 2004.” It defies any reasonable explanation that home prices increased by such enormous amounts while the inflation attributed amount was so small.

from 2000 through 2010, the NBSC gave only a 13 percent weighting to housing in the CPI basket. To put this weighting in perspective, it gave a higher weighting to “education and cultural articles” and only a slightly lower weighting to “clothing”. Most countries and even Chinese data indicate much higher levels of income dedicated to housing than 13 percent of 17 percent. In 2011, the NBSC reweighted the housing portion to a 17.2 percent despite the fact that it grew significantly slower than all other components of the CPI. In other words, even though housing fell significantly relative to other items in the NBSC basket between 2000 and 2010, it was magically reweighted upward in 2011. The NBSC is implicitly saying its own statistics are unreliable.

if we compare Chinese macro data to other countries we are left with odd inconsistencies. For instance, China experienced some of the highest levels of money growth excluding high inflation states; while numerous countries had comparable or higher nominal GDP, China reports inflation levels over the 2000 to 2011 time period less than the United States and among the lowest of even all developed countries. All of the Chinese real GDP story is dependent on low inflation data.

This matters for a very simple reason: it understates CPI and overstates real GDP.

A mere 15 days after the quarter, China has such efficient statisticians that they have collected a sampling of data and crunched the numbers? Makes you wonder why companies can’t release quarterly numbers in a few hours.

Official trade data with imports declining 15.5 percent, which given import over invoicing implies a larger drop probably closer to 20 percent, is not indicative of robust economy growing at 7 percent. Not only are prices collapsing due to lack of demand from China but volumes are dropping. Countries that grow at 7 percent do not reduce imports by 20 percent.

Then look at a wealth of corporate data, whether domestic Chinese companies or foreign multinationals. Almost universally, they are reporting flat to declining revenue and profits in China. In fact, corporate profits in China rose 0.6 percent, with 96 percent of that growth from investing in the stock market. In other words, absent the stock market boom, Chinese firms saw no profit growth.

Then consider the official industrial production growth of nearly 12 percent for the second quarter 2015. During the second quarter, the HSBC PMI showed constant contraction but somehow official data not only grew but grew well above estimates. Now the data is not directly comparable but to have such stark differences does invite questions.

https://thenanfang.com/heres-why-chinas-gdp-numbers-are-smoke-and-mirrors/

 

[waterbottle]

China Lies​

https://thenanfang.com/heres-why-chinas-gdp-numbers-are-smoke-and-mirrors/

...and it's working! We're closing in on 4000

 

[notting]

...and it's working! We're closing in on 4000

Well not really, it's hard to have a market go down when significant holders are not allowed to sell.
Not that it's such a mean thing cause 'the people' on this occasion, the little guys, are being allowed to get out without bringing down the banking system.
The significant holders are not being allowed to make a motza on the little guys.

 

[waterbottle]

Well not really, it's hard to have a market go down when significant holders are not allowed to sell.
Not that it's such a mean thing cause 'the people' on this occasion, the little guys, are being allowed to get out without bringing down the banking system.
The significant holders are not being allowed to make a motza on the little guys.

The caveat to that rule was that they could sell in 6 months' time.

So the question is, will those significant holders sell in 6 months time? What if in 6 months time they manage to surpass the previous peak? I would think in that case that they are less likely to sell out of their entire position.

 

[notting]

Foreign investment into China rose 8.0 percent in the first half of this year as mergers and acquisitions by overseas companies (EEEEEIDIOTS) more than quadrupled in value, the commerce ministry said Tuesday.

Foreign direct investment (FDI), which excludes financial sectors, totalled $68.41 billion during the January-June period, the ministry said. "Both the proportion and the transaction value of foreign mergers and acquisitions increased sharply," it said in a statement.

It gave the value of M&A activity at $13.19 billion, a gain of 336.5 percent from the same period last year, while its proportion of total FDI ballooned from 4.8 percent to 19.3 percent.

"With the increase of China's land prices and other costs, many companies (EEEEEIDIOTS) are now investing in the country in the form of mergers and acquisitions," said Shen Danyang, ministry spokesman.

In June alone, FDI growth slowed sharply to 1.1 percent, after a 7.8 percent year-on-year rise in May.:bonk:

The ministry also said that overseas direct investment (ODI) (EEEEEIDIOTS) from China rose 29.2 percent to $56.0 billion in January to June. It did not provide data for June alone.

China drew a total of $119.6 billion of FDI in 2014, up 1.7 percent, while ODI was up 14.1 percent at $102.9 billion, passing the $100 billion mark for the first time as Chinese companies eye opportunities abroad :badsmile: as domestic growth slows.

The world's second-biggest economy expanded 7.4 percent last year, the weakest pace since 1990, and slowed further to 7.0 percent in each of the first two quarters this year. (Yeah right)

In the January-June period, investment from the 28-member European Union (EU) (EEEEEIDIOTS) into China rose 13.7 percent to $4.08 billion, the ministry said.

Investment from France (EEEEEIDIOTS), which is included in the EU total, rose 46.9 percent to $660 million. From Japan, with which China is in disputes over territory and wartime history, it fell 16.3 percent to $2.01 billion.

And it fell sharply from the United States, dropping 37.6 percent to $1.09 billion, the figures showed.

Hong Kong is by far the biggest investor in China, accounting for $50.69 billion of the six-month total. It showed a gain of 15.6 percent during the period.

FDI growth has slowed in recent years owing to factors including rising costs, competition from Southeast Asian countries, and concerns over official investigations into foreign companies.

At the same time China's acquisition of foreign assets, particularly energy and resources, has increased with firms encouraged to invest abroad to 'gain market access and international experience' CRAP.

Outbound investment from China into the US rose 30.1 percent in the first six months, but gained just 1.9 percent into the EU, the ministry said, without giving totals.

The ASEAN group of Southeast Asian countries saw investment from China rise by 92.9 percent, the ministry said, while that to Hong Kong gained 71.8 percent.

China keeps the Yuan high, encourages foreigners to pair up with it's worthless companies and divests like crazy away from itself.

Has the world wized up as a result of China preventing significant stake holders to sell shares they invested in?
Probably not.

 

[rimtas]

Despite fundamentals in China and most recent "crash", the movement itself is neither much significant long run nor spectacular or "bubbly" as most pundits suggest. It looks like a normal wave.
The year long 100%+ rise can be considered as a kickoff of the larger move, that ultimately carry prices above 2007 high, and much much higher later. For this we need a bull market in progress, that could be confirmed if All Ords surpasses 2007 peak as well sometimes in a next few years.









But alternative view suggests that a Top is in place and the crash is developing, wich ultimately leaves China's stock market in ruins, setting a widespread panic (close to the bottom) in the entire region, Australia as well.




In both scenarios one more wave down below 3400 in Shanghai Composite should develop, which will tell where market is heading in the long run. A quick dive to 3000 and even more faster retrace back should weigh towards long term bull, and a dive towards 2000 will say that China is busted.

 

[CanOz]

I wonder which wave count the CCP is using?

 

[rimtas]

you mean CCCP?

 

[Uncle Festivus]

China will be fine, slowing to 5% GDP growth in the next 5 years.

No idea what their stock market is doing though.

? 7% is break even for them. They are in recession. Lot's of gluts of everything made with Chinese QE to work through yet so many years of sub par performance, if they are that lucky?

 

[Uncle Festivus]

Despite fundamentals in China and most recent "crash", the movement itself is neither much significant long run nor spectacular or "bubbly" as most pundits suggest. It looks like a normal wave.
The year long 100%+ rise can be considered as a kickoff of the larger move, that ultimately carry prices above 2007 high, and much much higher later. For this we need a bull market in progress, that could be confirmed if All Ords surpasses 2007 peak as well sometimes in a next few years.

In both scenarios one more wave down below 3400 in Shanghai Composite should develop, which will tell where market is heading in the long run. A quick dive to 3000 and even more faster retrace back should weigh towards long term bull, and a dive towards 2000 will say that China is busted.

The fundamentals are probably even worse - the stock casino bubble has busted, just need to see what the fallout is now.

Just hope the 'controllers' use technical analysis as well to know when to juice.

 

[notting]

He said that Chinese people were accustomed to having a fixed social status under the Communist system. Now, he said, many people are looking to the stock market to define their worth.

Cheered on by relatives, co-workers and rapturous headlines in the state-run news media, ordinary investors in China helped stoke a remarkable rally over the last year. With easy access to loans for trading, individual investors opened more than 38 million stock accounts in the second quarter, compared with nine million in all of 2014.

They were encouraged by reports this spring in The People’s Daily, the flagship paper of the Communist Party, which trumpeted the seemingly never-ending bull market.

Kind of makes both funny and sad reading.

http://www.nytimes.com/2015/07/23/business/international/stock-downturn-hits-chinese-investors-in-the-heart-not-just-the-wallet.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0

 

[waterbottle]

SSE holds above 4000 to close at 4123.

Down by 20% since the peak, and closing in.

Will you change your outlook if they get to 4600 i.e. 10% fall from peak?

 

[notting]

SSE holds above 4000 to close at 4123.
Down by 20% since the peak, and closing in.
Will you change your outlook if they get to 4600 i.e. 10% fall from peak?

Mate the dictatorship is totally controlling what it does. What the frick is there to change your mind about? It's not a market. https://www.aussiestockforums.com/forums/showthread.php?t=9746&p=874060&viewfull=1#post874060

 

[CanOz]

SSE holds above 4000 to close at 4123.

Down by 20% since the peak, and closing in.

Will you change your outlook if they get to 4600 i.e. 10% fall from peak?

Waterbottle, here's my

I say we test for responsive participants (lots of selling) in the prior value area, marked in magenta. I can't help but think there will be sellers there....If the market doesn't reject that completely, then i would change my bias, until then i would not be short.

The Hang Seng has been dragged into a similar pattern, but the area where I'm looking at for prices to stall is not an area of prior acceptance, only rejection. Again, only my view....

Cheers,


CanOz

 

[waterbottle]

Mate the dictatorship is totally controlling what it does. What the frick is there to change your mind about? It's not a market. https://www.aussiestockforums.com/forums/showthread.php?t=9746&p=874060&viewfull=1#post874060

So what if they control what the market does?! What about all that stimulus that was pumped out post-GFC? You knew it was wrong but if you kept quiet and entered the market then your portfolio grew.

Waterbottle, here's my

I say we test for responsive participants (lots of selling) in the prior value area, marked in magenta. I can't help but think there will be sellers there....If the market doesn't reject that completely, then i would change my bias, until then i would not be short.

The Hang Seng has been dragged into a similar pattern, but the area where I'm looking at for prices to stall is not an area of prior acceptance, only rejection. Again, only my view....

Cheers,


CanOz

CanOz, I agree that there may indeed be a few sellers. But, IMO, the smaller participants i.e. those who hold <5% of a stock, will not have any significant impact because their behaviour is frankly uncoordinated -there is a media blackout about negative market news and the CCCP will punish anyone who plans on shorting ergo those <5% are inherently "bullish".

Again, IMO, the real concern is what those with a holding of 5% or greater do in 6 months (now 5 months) time. Their position is large enough to have an impact on price action so their behaviour does not necessarily need to be co-ordinated to have any impact on the market.
If I were to put myself in their shoes: Would I liquidate my position in 5 months time if my portfolio was down by only 10% AND the CCCP threatens to gaol/punish me for doing so? I would probably sell part of it, but why would I sell off the lot (and in turn trigger another down turn)?

 

[Uncle Festivus]

CanOz, I agree that there may indeed be a few sellers. But, IMO, the smaller participants i.e. those who hold <5% of a stock, will not have any significant impact because their behaviour is frankly uncoordinated -there is a media blackout about negative market news and the CCCP will punish anyone who plans on shorting ergo those <5% are inherently "bullish".

Thant about sums it up so no need for charts whle ever the central planners have it covered. The danger is if it does keep correcting because that will mean they have lost control, and hence it will be the start of the global sell off and next crisis?