In the Financial/Economic News

[Randy W]

You could drown in the basement!

 

I think a bubble is a bubble and, by definition, means over-valued. Like the beach ball being batted around by the crowd at the game, it can only be sustained for so long. It has to come down. Same for the over-heated market. And, maybe the 8% drop (correction?) is actually within a range of devaluation considered acceptable by the ccp.

 

I mean, somebody there understands that the value of the market should reflect true worth, and not just a number to be made higher and worn as a badge of honor ...

 

As other pundits say, the market is a smaller part of the overall economy than it is in the US, so less reason to panic. The party should have been warning much earlier that amateurs (consumers) should not over-invest in the market. That would have cost nothing.

 

 

Instead, it was this:

 

Stock Market Plunge in China Dents Communist Party’s Stature

 

Under Mr. Xi, the government has urged households to invest in the stock market to meet several economic imperatives: to generate more capital for state-run companies being weaned off bank loans, to strengthen the private companies that create many of the country’s jobs, and to lift the confidence of consumers so that they will play a bigger role in driving economic growth.

Moreover, editorials in China’s state-run news media celebrated the rising indexes as affirmation of Mr. Xi’s recipe for national strength: a measured easing of state controls on the economy while keeping political power firmly in the hands of the party elite.

Market adulation reached its peak in April, when a commentary on the website of People’s Daily, the party’s flagship newspaper, told readers the 4,000 point mark reached by the Shanghai Stock Exchange was “only the start of the bull market.”

 

[tsap seui]

Oh my....thanks for reminding me of this great song. It is what I hear in my head when I read or hear about some stock market....

 

"What goes up, must come down"

 

"Ride a painted pony let the spinning wheel fly"

 

https://youtu.be/pReb7P02qdk

[Randy W]

Continuing (from the SCMP) . . .

 

Chinese stocks in free-fall as Shanghai crashes to end midday 8 per cent lower

Markets in China lose another US$1 trillion in value as pain from sell-off deepens

 

Chinese stocks plunged to their lowest level in over five months on Monday, with only about 100 stocks listed in Shanghai still trading in the afternoon, as the other 993 stocks listed on the benchmark index either halted trading voluntarily or were forced to do so after it fell by the daily 10 per cent limit.

 

The benchmark Shanghai Composite Index plunged 8.45 per cent, or 296.55 points, to 3,211.20 before the lunch break, the lowest level in five months as investors rushed to dump shares amid fears that hard landing risks in China is rising after a slew of policy incentives failed to improve bolster economic performance.

 

Shanghai's gains for the year have been erased and the index is now in negative territory in 2015.

 

Among the 993 that halted trading, 126 firms announced trading halt spontaneously while the rest fell by the single day trading limit. The situation is similar in Shenzhen as well.

 

The Shenzhen Composite closed the morning session at 1,884.26, down 7.61 per cent, or 155.13 points.

 

Hong Kong’s Hang Seng Index lost 4.64 per cent to 21,369.70, the lowest level in 25 months in the morning. The Hang Seng China Enterprises Index lost 6.6 per cent, or 678.56 points, to 9,516.49.

 

Fears about the Chinese economy have infected global stocks, leading to a vicious round of risk aversion selling.

 

[Randy W]

At the bell . . .

 

‘Black Monday’ devastates Chinese stocks as Shanghai index sees biggest one-day fall since 2007

Markets in China lose another US$1 trillion in value as pain from sell-off deepens. Shenzhen finishes 7.7 per cent down and Hong Kong's Hang Seng Index loses over 5.1 per cent by the close

 

The Shanghai Composite Index dropped again in the last hour to close at 3,208.93 points, down 8.52 per cent or 298.81 points.

 

The CSI 300 also declined to end at 3,271.89, down 8.85 per cent or 317.65 points.

 

 

The Shenzhen Composite Index appeared to bottom out at 1,882.46, closing down 7.70 per cent or 156.93 points. The ChiNext did likewise, trading to 2,152.61, down 8.08 per cent or 189.34 points.

[Thomas Promise]

The Dow dropped almost a 1,000+ points at the opening bell. It has rebounded down 500+ points now. Its going to be a blood bath.

[Greg.D.]

More like lancing a boil. It was over-valued. Note: i am NOT a financial professional!

[Randy W]

from the NY Times - you can follow the "Buy high, sell low" strategy, OR . . .

 

Advice After Stock Market Drop: Take Some Deep Breaths, and Don’t Do a Thing

[Thomas Promise]

The 1st 30 minutes of trading the Dow is up over 300 points. Shanghai Stock Exchange dropped another 7.63%. China can't fudge the numbers anymore about how well their economy is doing.

[dnoblett]

http://editorialcartoonists.com/cartoons/BeeleN/2015/BeeleN20150825_low.jpg

[Randy W]

Comparing China with Korea, Japan, and Taiwan at similar points in their development (from the New York Times)

 

Political Risks May Foil Economic Reform in China

 

Household spending was always the main source of demand in all three, declining gradually to about 50 percent of gross domestic product when they were about as rich as China is today. Investment rates, which rose sharply in the early stages of their development, peaked at that time at around 35 percent of G.D.P.

By these metrics, China’s economy is upside down: Consumer spending by households is only 35 percent of the nation’s G.D.P. — one of the lowest levels in the world. Its investment rate — nearly 50 percent of G.D.P. — is extraordinarily high. And the productivity of this investment is dismal.

To a large extent, its authoritarian command and control economic governance is to blame. Limits on legal migration to cities promoted an underclass of illegal urban workers toiling for meager wages, slowing consumer spending and hindering urban development. State-owned monopolies plowed profits back into investment rather than into government spending on social welfare. Near-zero interest rates on deposit accounts provided cheap loans to business but penalized savers.

And this means the Chinese transition will be much more complicated. Unlike Japan, Taiwan and Korea — which went into their transitions with substantial trade deficits, which swung into surplus to pick up the slack when investment rates declined — China has been running a hefty surplus for years. A still-fragile world economy is in no position to absorb even more Chinese imports.

 

[Randy W]

Another little plunge .. .

 

Beijing’s crackdown on brokerages designed to shake up China’s power-money structure, say analysts

Analysts highlight likelihood of short-term market volatility

 

Beijing is trying to rid mainland stock markets of collusion between power and money by stepping up investigations of securities companies, analysts said, while warning of shocks to markets that had just stabilised.

 

Three of China’s top 10 brokerage companies by assets – Citic Securities, Guosen Securities and Haitong Securities – reported late this week that they were being investigated by the China Securities Regulatory Commission (CSRC), all suspected for having breached the mainland securities regulations.

 

At a press briefing on Friday the CSRC did not detail the matters being looked into, but analysts said the crackdown indicated Beijing was intent on shaking up China’s political/economic structure.

 

“Clearly [Communist Party general secretary] Xi Jinping is trying to change a rather long-held culture where those who obtain powerful positions believe that the rules don’t apply to them, and that clearly is changing and he has changed behaviour,” said Professor Paul Gillis, from Peking University’s Guanghua School of Management.

 

“Its my sense this started out as a search for the guilty to blame someone for the major market correction. But I think it has morphed into an effort to clean up the industry and to try to take market manipulating practices out of the markets so the markets can operate more fairly, and in that way I would link it back to the anti-corruption campaign.”

 

. . .

 

Before they plunged on Friday, the mainland’s stock markets had only just stabilised, with the benchmark Shanghai Composite Index rebounding 20 per cent from an August low. However if fell 5.5 per cent on Friday, with brokerages leading the way down.

 

[Doug]

do you have an opinion about chaoaicai.com for a mutual fund?

[Randy W]

do you have an opinion about chaoaicai.com for a mutual fund?

 

 

It's too Chinese for me to even look at - Jiaying isn't savvy enough to help me there, and I would avoid any direct investment in Chinese equities. This seems like NOT a good time for even indirect investments - i.e., mutual funds like MCHFX.

 

My guess is that your wife is taking a look at this?

[Randy W]

China’s stock market to install circuit breaker after January 1 to stem future routs, says Caixin

Trading would be suspended for 30 minutes when market rises or falls by 5 per cent and business called off for the day if it goes up or down by 7 per cent

 

 

Quote

The CSI 300 Index will be used as a major benchmark, according to a draft regulation issued by Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange in early September.

 

The mechanism could only be triggered once a day. The 10 per cent cap for the daily upward and downward limit for individual stocks will be kept.

 

Edited April 26, 2021 by Randy W (see edit history)

[Randy W]

Further devaluation to come? The yuan is now at around 6.43 to the dollar

 

China’s Dollar-Depegging Signal Likely a Bet on More Greenback Strength

 

China’s indication Friday it will loosen its long-time peg to the dollar and instead target a basket of currencies on the eve of an expected U.S. Federal Reserve rate increase is likely no coincidence.

 

The Fed’s anticipated move next week and further increases in the coming year are expected to pressure the dollar higher against most major currencies around the world.

 

That’s the last thing Beijing wants as it struggles to prevent its economy from collapsing. A stronger yuan would add another headwind to its travails, weighing on exports.