China Stocks Erase 2015 Gain as State Support Fails to Stop Rout

[anon45]

China Stocks Erase 2015 Gain as State Support Fails to Stop Rout

China’s stocks plunged, with the benchmark index erasing its gains for the year, as government support measures failed to allay investor concerns that a slowdown in the world’s second-largest economy is deepening.

The Shanghai Composite Index sank 8 percent to 3,226.14 at 10:50 a.m. local time, dropping below the key 3,500 level that previously spurred state buying. The Hang Seng China Enterprises Index lost 5.3 percent. Taiwan’s Taiex index slid as much as 7.5 percent in its biggest decline since 1990.

Worsening economic data and signs of capital outflows are undermining unprecedented government attempts to shore up the country’s $6 trillion stock market. While China said over the weekend it will allow pension funds to buy shares for the first time, a speculated cut in bank reserve ratios failed to materialize.


“This is a real disaster and it seems nothing can stop it,” Chen Gang, Shanghai-based chief investment officer at Heqitongyi Asset Management Co. “If we don’t cut holdings ourselves, the fund faces risk of forced closure. Many newly started private funds suffered that recently. I hope we can survive.”

More than 650 stocks fell by the daily 10 percent limit on the Shanghai Composite, including China Shenhua Energy Co. and China Shipbuilding Industry Co . The gauge has tumbled 37 percent from its June 12 peak to wipe out more than $4 trillion of value.

Economic growth slowed to 6.6 percent in July, according to Bloomberg’s monthly GDP tracker. China’s first major economic indicator for August signaled a further deterioration as a private manufacturing index fell to the lowest level in six years.

Stock Valuations
“China’s economy is pretty ugly and some sectors have bubbles,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co., who’s keeping his holdings unchanged. “Selling pressure around global markets is also weighing on local sentiment. The Shanghai Composite may fall to around the 3,000-point level.”

Stocks on mainland bourses traded at a median 61 times reported earnings on Friday, according to data compiled by Bloomberg. That’s the most among the 10 largest markets and more than three times the 19 multiple for the Standard & Poor’s 500 Index.

Yuan positions at the central bank and financial institutions fell by the most on record last month, a sign capital outflows have picked up. Chinese equity funds were the biggest contributors to more than $4 billion of outflows in Asia excluding Japan in the week to Aug. 19, EPFR Global said. Margin traders reduced holdings of shares purchased with borrowed money for a fourth day on Aug. 21.

Pension Funds
PetroChina Co., the nation’s biggest company by market value, plummeted 8.4 percent. Industrial and Commercial Bank of China Ltd., the second largest, headed for its biggest loss since Jan. 19 with a 7.7 percent slump.

The State Council, or cabinet, on Sunday announced it will allow pension funds to invest as much as 30 percent of their total net assets in stocks. Pension funds had net assets of 3.5 trillion yuan ($547 billion) by the end of 2014, Xinhua News Agency reported.

The move is the latest attempt by the government to support the equity market, after arming a state agency with more than $400 billion, banning selling by major shareholders and telling state-owned companies to buy stocks.

“The news on pension funds over the weekend was positive, but not having the expected required-reserve ratio cut or any other larger measure seems to have disappointed investors,” said Gerry Alfonso, a Shanghai-based trader at Shenwan Hongyuan Group Co. “But it is questionable whether even with one the market would have rebounded.”

China Stocks Erase 2015 Gain as State Support Fails to Stop Rout - Bloomberg Business

Get ready for the pain tomorrow.

 

[F-22Raptor]

Yikes

 

[xunzi]

THIS 2 DAY STOCK MARKET CRASH WAS LARGER THAN ANY 1 DAY STOCK MARKET CRASH IN U.S. HISTORY
This 888 point crash comes in the 8th month of our calendar


Image Credits: Katrina.Tuliao / Wiki.

by MICHAEL SNYDER | ECONOMIC COLLAPSE | AUGUST 22, 2015

16241590
We witnessed something truly historic happen on Friday.

The Dow Jones Industrial Average plummeted 530 points, and that followed a 358 point crash on Thursday. When you add those two days together, the total two day stock market crash that we just witnessed comes to a grand total of 888 points, which is larger than any one day stock market crash in U.S. history. It is also interesting to note that this 888 point crash comes in the 8th month of our calendar. Perhaps that is just a coincidence, and perhaps it is not. It just struck me as being noteworthy. This is the first time that the Dow has dropped by more than 300 points on two consecutive days since November 2008, and we all remember what was happening back then. Overall, this was the worst week for the Dow in four years, and there have only been five other months throughout history when the Dow has fallen by more than a thousand points (the most recent being October 2008). Of course we still have six more trading days left in August, so there is plenty of time remaining for even more carnage.

By itself, the 530 point plunge on Friday was the ninth worst stock market crash in all of U.S. history. The following list of the top eight comes from Wikipedia…

#1 2008-09-29 −777.68

#2 2008-10-15 −733.08

#3 2001-09-17 −684.81

#4 2008-12-01 −679.95

#5 2008-10-09 −678.91

#6 2011-08-08 −634.76

#7 2000-04-14 −617.77

#8 1997-10-27 −554.26

Another very interesting thing to note is that the largest stock market crash in U.S. history took placeon the very last day of the Shemitah year of 2008, and now we are less than a month away from the end of this current Shemitah year.

It is funny how these strange “coincidences” keep happening.

The financial carnage that we witnessed on Friday was truly global in scope. On a percentage basis, Chinese stocks crashed even more than U.S. stocks did. Japanese stocks also crashed, so did stock markets all over Europe, and emerging market currencies all over the planet got absolutely destroyed.

The following is how Zero Hedge summarized what went down…

• China’s worst week since July – closes at 5 month lows
• Global Stocks’ worst week since May 2012
• US Stocks’ worst week in 4 years
• VIX’s biggest weekly rise ever
• Crude’s longest losing streak in 29 years
• Gold’s best week since January
• 5Y TSY Yield’s biggest absolute drop in 2 years

Even though I specifically warned that this would happen, and have been explaining why it would happen on my website in excruciating detail for months, the truth is that I didn’t expect stocks to start crashing this quickly or this ferociously.

Normally, August is a fairly slow month in the financial world. As I have discussed previously, most of the really noteworthy stock market crashes throughout history have taken place during the months of September and October. So I thought that things wouldn’t start getting really crazy for another few weeks at least.

Financial markets tend to fall much faster than they go up, and I believe that we are moving into a time of extraordinary volatility. There will be huge down days, and there will also be huge up days. In fact, the three largest single day rallies in Dow history happened right in the middle of the financial crisis of 2008. So don’t let what happens on any one particular day fool you.

An absolutely gigantic global financial bubble is beginning to burst, and stocks could potentially fall a very, very long way. For instance, just consider what MarketWatch columnist Brett Arends has just written…

I don’t mean to be alarmist or to induce panic, but someone needs to tell the public that there is a plausible scenario in which the U.S. stock market now collapses by another 70% until the Dow Jones Industrial Average falls to about 5,000.

It is important to keep in mind that Arends is not a “bear” at all. He is a very level-headed analyst that tries to objectively look at all sides of things.

I sincerely hope that global financial markets will stabilize for at least a couple of weeks. But there is absolutely no guarantee that will happen.

So many of the things that I have been warning about on this website and on End of the American Dream are starting to unfold right in front of our eyes. If I am right, this is just the beginning. I believe that we are moving into a time of unprecedented chaos, and our nation is about to be shaken to the core.

Hopefully you have been preparing for the storm that is coming for quite a while and you will not be surprised by what is about to happen.

Unfortunately, the same cannot be said for the vast majority of Americans. Most of them are totally unprepared for what is coming, and they are going to be completely blindsided by the events that will unfold in the months ahead.

The relative calm of the past few years has lulled millions into a false sense of complacency.

If you are one of those that have dozed off, I have a word of warning for you…

Wake up and get ready.

It’s starting.

----------


Good thing for us. Our population don't invest in stock like the US public did. LOL

 

[Perpendicular]

interesting

 

[ahojunk]

Three things to note:-

1) What goes up must come down.

2) The stock market is not a casino. They serve two different functions.

3) Only invest in things that you understand.

 

[Economic superpower]

Stock market is WAY more important to the US than China.

 

[Hamartia Antidote]

China stocks open down 6.4% extending Black Monday plunge, Companies & Markets News & Top Stories - The Straits Times

 

[IndoUS]

Can someone tell me the reason and as to what the solution can be, I am not really that good in investing I do have some investment but they are done by my sister.

 

[F-22Raptor]

China stocks open down 6.4% extending Black Monday plunge, Companies & Markets News & Top Stories - The Straits Times

It might be a very nasty week for the world economy.

 

[Hamartia Antidote]

It might be a very nasty week for the world economy.

oh I don't doubt it.

 

[TaiShang]

Good. Good. Hopefully more Yuan devaluation will follow.

He he.

My former redneck co-worker in the Southern US said people are putting iron bars on their windows. Especially on high-rises.

Peter Schiff Warns "The Fed Is Spooking The Markets, Not China"

Submitted by Peter Schiff via Euro Pacific Capital,

Fasten your seat belts, this ride is getting interesting. Last week the Dow Jones Industrial Average was down more than 1,000 points, notching its worst weekly performance in four years. The sell-off took the Dow Jones down more than 10% from its peak valuations, thereby constituting the first official correction in four years. One third of all S&P 500 companies are already in bear market territory, having declined more than 20% from their peaks. Scarier still, the selling intensified as the week drew to a close, with the Dow losing 530 points on Friday, after falling 350 points on Thursday. The new week is even worse, with the Dow dropping almost 1,100 points near the open today before cutting its losses significantly. However, no one should expect that this selling is over. The correction may soon morph into a full-fledged bear market if the Fed makes good on its supposed intentions to raise interest rates this year. Have no illusions, while most market observers are quick to blame the sell-off on China, this market was given life by the Fed, and the Fed is the only force that will keep it alive.



The Dow has now blown through the lows from October 2014, when fears over life without quantitative easing and zero percent interest rates had caused the markets to pull back about 5%. Back then when market fear began spreading, St. Louis Fed President James Bullard publically issued a few choice words which reassured the markets that the Fed stood ready to reignite the QE engines if the economy really needed a fresh dose of stimulus. By the end of the year the Dow had rallied 10%.

Amid last week's carnage, Mr. Bullard was at it once again. But instead of throwing the market a much needed life preserver, he threw it an unwanted anchor. He offered that the economy was still strong enough to warrant a rate increase in September. He was careful to say, however, that the Fed is still "data dependent" and will therefore base its decision on information that will come out over the next three weeks. So after nearly seven years of zero percent interest rates, the most momentous decision the Fed has made since the Great Recession will be dictated by a few weekly data points that have yet to emerge. Haven't seven years of data provided them enough information already? What's next? Will they have to check the five-day forecast to insure that there will be no rain before they pull the trigger?

As I have been saying for years, the Fed has always known that the fragile economy created through stimulus might prove unable to survive even the most marginal of rate increases. But in order to instill confidence in the markets, it has pretended that it could. Wall Street has largely played along in the charade, insisting that rate increases were justified by an apparently strengthening economy and needed to restore normalcy to the financial markets.

But the recovery Wall Street had anticipated never arrived, and traders who had earlier demanded that the Fed get on with the show, have now panicked that the rate hikes are about to occur in the face of a weakening economy. As a result, we are seeing a redux of the 2013 "taper tantrum" when stocks sold off when the Fed announced that it would be winding down its QE purchases of bonds.

The question now is how much further the markets will have to fall before the Fed comes to the rescue by calling off any threatened rate increase? What else could pull the markets out of the current nose dive?

Think about where we are. Stock valuations are extremely high and earnings are falling and the economy is clearly decelerating. The steady march upward in stock prices has been enabled by a wave of cheap financing and share buybacks. There are very few reasons to currently suspect that earnings, profits, and share prices will suddenly improve organically. This market is just about the Fed. After one of the longest uninterrupted bull runs in history, bearish investors have learned the hard way that they can't fight the Fed. So why should they now expect to win when the Fed is posturing that its about to embark on a tightening cycle?

If the Fed were to do what it pretends it wants to do (embark on a tightening campaign that brings rates to about 2.0% in 18 months), and in the process ignore the carnage on Wall Street, I believe we would see a consistent sell off in which most of the gains made since 2009 would be surrendered. After all, how much of those gains came from bona fide improvements in the economy? It was all about the twin props of Quantitative Easing and zero percent interest rates. The Fed has already removed one of the props, and it's no accident that the markets have gained no ground whatsoever in the eight months since the QE program was officially wound down.

As the market considers a world without the second prop, a free fall could ensue. Now that we have broken through the October 2014 lows, there is very little technical support that should come in to play. A free fall in stocks could be an existential threat to an already weak economy. It should be clear the Janet Yellen-controlled Fed would not want to risk such a scenario. This is why I believe that if the sharp sell off in stocks continues, we will get a clear signal that rate hikes are off the table.

Of course, even if it does throw us that bone, the Fed will pretend that the weakness was unexpected and that it does not come from within (but is caused by external forces coming from China and Europe). Using that excuse, it will attempt to prolong the bluff that its delay is just temporary. For now at least Wall Street is happy to play along with the blame China game. This ignores the fact that China has had much bigger sell offs in recent weeks that did not lead to follow-on losses on Wall Street. I think the problems in China are the same problems confronting other emerging economies, namely the fear of a Fed tightening cycle that would weaken U.S. demand, depress commodity prices while simultaneously sucking investment capital into the United States, and away from the emerging markets, as a result of higher domestic interest rates and the strengthening dollar.

But if a temporary halt in rate hike rhetoric is not enough to stem the tide, a more definitive repudiation may be needed. Such an admission should finally open some eyes on Wall Street about the true nature of the economy and the unjustified strength of the U.S. dollar. That already may be happening. The dollar index closed at 95 on Friday...down from a high of 98 two weeks prior. On Monday, the index blew through the 93.50 support level and dropped more than 3% in just one day, down to intraday low of 92.6. Who knows where it stops now?

Gold is rallying in the face of the crisis and has moved quickly back to $1,160, up around $80 in just two weeks. The bounce in gold must be causing extreme angst on Wall Street. Just two weeks ago, amid widening conviction that gold would fall below $1,000, it was revealed that hedge funds, for the first time, held net short positions on gold. Those trades are not working out. With the major currencies and gold now strengthening against the dollar, the greenback has had some success against far lesser rivals like the Thai baht and the Kazakhstan tenge. But these victories against currencies largely tied to commodities may be the last fights the dollar wins for a while, especially if Janet Yellen finally comes clean about the Fed's inherent dovishness. Those currencies now falling the farthest may be the biggest gainers if the Fed shelves rate increases.

Some still cling to the belief that the Fed will deliver one or two token 25 basis point rate increase before year end. But this could expose the Fed to a bigger catastrophe than doing nothing at all. If it actually raises rates, and the crisis on Wall Street intensifies, further weakening an already slowing economy, the Fed would have to quickly reverse course and cut back to zero. This would put the Fed's cluelessness and impotency into very sharp focus. From its perspective anything is better than that. If it does nothing, and the economy continues to slow, ultimately "requiring" additional stimulus, it will at least appear that its caution was justified.

Unfortunately for the Fed, it won't be able to get away with doing nothing for too much longer. Events may soon force it to show its hand. Then perhaps some may notice that the Fed is holding absolutely nothing and has been bluffing the entire time.

 

[Economic superpower]

The currencies of emerging economies are getting destroyed because everyone is in panic and are going to the dollar.

The US stock markets were down over 1,000 points (6-7%) when it opened.

If anyone thinks the Fed will raise interest rates into a rapidly weakening global economy, then they are delusional. They will come up with another round of QE.

This won't be a collapse because the collapse was in 2008, and the central banks injected trillions into their economies and now it's effect is waning. 7 years later, the global economy is in worse shape as central banks are already at 0% interest rates and QE has already been used in massive doses. QE will have to be even bigger in size. Debt buildup is already massive.

The pain will be far worse now than in 2008 when there were more tools available for the central banks to reduce the pain.

 

[anon45]

Can someone tell me the reason and as to what the solution can be, I am not really that good in investing I do have some investment but they are done by my sister.

long story short : People drinking the Kool-aid about an ever rising Chinese economy coming back to earth.
Should be considered a large correction. If you have the ability to wait things out, now would be a great time to buy.

 

[terranMarine]

The Americans were laughing at our crashing market and closing the balcony now they are all hysterical from the latest Chinese crash. Everybody who wanted China to crash well here it is. Just don't commit suicide

 

[TaiShang]

The Americans were laughing at our crashing market and closing the balcony now they are all hysterical from the latest Chinese crash. Everybody who wanted China to crash well here it is. Just don't commit suicide

I am taking calls from friends in the US (they are good people, by the way, like Trump says often) about people committing suicide, seriously. This is no laughing thing, but, considering that the US suburbs might not have much high-rises, we may anticipate gun-related incidents to increase.

I just read, the US has the highest gun ownership and the highest gun-related homicide (by number and percentage) rates in the world.

That's why sane people are putting their rifles and shotguns under lock and putting bars on buildings.

This is sad.