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

[NiceGuy]

China stock market is not in line with Chinese economy, like you IQ is not in line with your age, of course, this refer to Chinese standard, not Vietnamese standard, every time, reading comments, I will smile, in my real life, not meet a 30 years old man, but IQ is just 8 years old level, hehe.

Some CNese here admit that TPP will hurt CN economy seriously, so how abt u, Mr Ah Q ?? Do u admit the same ??

 

[XiangLong]

This is a tremendous loss in capital. Buddy, $3.7 Trillion is almost double the GDP of India, $3.7 Trillion is almost China's FOREX reserves.

It IS a lot capital, I am not trying to sugarcoat it or anything, what I am trying to say, is that our financial system is still relatively young. China's indexes are nowhere as stable as say the AEX or Down Jones, this has been known however for years. The market was (hopefully) until today reigned by speculations of reckless investors. The current $3.7 trillion will undoubtedly have an considerable effect. And while this may come in hard for many, there is a valuable lesson in all this that has been learned. Like I said, you can't expect to climb up in this economic world without falling down HARD a couple of times. The financial losers have been naive and opportunistic in their strife for profit and have been outwitted by the more seasoned stock brokers. While being hard to swallow for most, this was a hard-needed lesson for the Chinese and investors elsewhere.

For now, I don't see any signs of an immediate impending crisis. And the reason for this, with the limited knowledge I have of economics, is the fact that most of the invested capital came out of private hands.

As you know, banks have maintained their high lending rates which have made it very undesirable to write out loans. So people were forced to pay from their own pockets rather than with capital lent from banks. Comparing to the debt crisis of 2008 for example, people were already speculating with borrowed money to make ends meet with the losses they had already made on top of the loans that were written out. This is not the case right now in China.

China's Bear Market: An Investor Crisis Or Opportunity? - Forbes

Making the comparison now in 2015, the great majority of people now only lost their life savings or lost the gamble they took with their houses. And in this, the central bank might just come in to save the day by lowering lending rates, and therefore give people ''a second chance'' to cut their losses. I just hope that these reckless investors have learned from this debacle, and that this debacle might even serve as a turning point in maturing China's financial sector.

And I am not the only one who is seeing opportunities in this current situation.

China's Bear Market: An Investor Crisis Or Opportunity? - Forbes

 

[sweetgrape]

Some CNese here admit that TPP will hurt CN economy seriously, so how abt u, Mr Ah Q ?? Do u admit the same ??

When do you believe Chinese, I am also a chinese, I say, TPP will not hurt Chinese economy, but will let you be slave of USA, do you believe that, low IQ Vietnamese?!

 

[Tiger Genie]

It is a simple question of how much or how little Goldman Sachs has riding on Chinese securities an derivatives. If GS has a lot invested China will be saved. If not, London and DC will take pleasure in watching Chinese froth being dissipated. HK however may suffer a lot unfortunately

 

[ito]

Quota are not meant to prevent stock slide. It is meant to achieve the opposite, it is meant to keep the price down. By restricting the flow, you are preventing it from overheating, but since the post is simply meant to prove that government can and will exert influence on the stock price. Detailed discussion of each mechanic is not needed.

Oh, by the way, look at this article from Forbe for some government stock market manipulation:

The Government's Influence On The Stock Market - Forbes

This is just a small example. Like I said, why would anyone believe government can't affect stock market? It is just another sector of economic activity and certainly has nothing special that makes it "above the influence".

Have you read the Forbes link you have given? In short it says government interventions didn't worked, but further exacerbated the situation.

Even if you are right, which I am sure you are not, a manipulated low priced stock would not remain low priced because it attracts investors to buy because of its low price in turn increase the demand for the stock and with the demand price too. Markets are self correcting.

As far as I know 'quotas' and 'stopping the trading' are meant to stop further slide in the market and not to keep the price down or for preventing if from overheating.

 

[sweetgrape]

There are two kind of markets: primary and secondary. Primary markets are where the stock is directly sold by the company to the public. Once the stock is issued in the primary market, it is traded in the secondary market. This is where the prices of the stock are determined. If there is more demand for a stock the price of the stock rises, if the demand for the stock is falling so is the price. General public or institutions on behalf of people trade stocks in market. If price of the stock increase the holder of that stock benefits from that price increase. If the price falls the holder of the stock looses money.

Stock index are created from weighted average of select stocks. If the index rise from 2000 point to 5000 point, meaning if you create a portfolio consisting of stocks from the stock index keeping the weights intact you will get $5000 if you invest $2000 during the index rise. Generally stock index give an indication on how the stock prices in the market are moving.

Guy, you make it complex, I am well in finance, but know a little, below is my opinion, if wrong, correct me:
1.what's stock market: Stock is a market, that let company collecting money for company developing through stock exchanging, first, stock itself is not unvalued, but because it can exchange, it has price, like currency.

2.The company which IPO get the first benifit from the stock market: When a company start IPO, the instituation(A) and public(B) can buy the share through Primary and secondary market that you said( Normal public can't buy it through Primary market), if the company have 1 million shares, assume that, each share's price is $20(In fact, in primary, you can get it cheaper, for simple, let's set it $20), and in fact, in the 1 million shares, many are owned by company owner(No exchange frequentarily generally) , assume about 0.5 million, so the company get about 10 million$, instituation and public lost 10 million$, but they have shares.

then instituation and public exchange the share in the secondary market, if the share price up to 30$, C buy them, so till now: Company get 10 million, the A and B earn 5 million, the C spend 15 million on these, the C's wealth is distributed to Company, A, B, the whole wealth is 15 million( If you want caculate the 0.5 million shares owned by company owner, the whole value is from 20 million to 30 million).

Then if the share price to 10$, C sell it to D, C lost 5 million$,the price of 0.5 million shares is down from 15 million to 5 million right. is 10 million disappear, no one get it? I don't thing so, from IP, Company earn 10 million, A and B earn 5 million, D lost 10 million, and value of 0.5 million is 5 million: 10(Company earned) +5( A and B earned) = 10( D lost) + 5 (Value of 0.5 million). it is wealth transfer, not disappear.

The $3.7 trillion has been took by others before falling.

 

[tranquilium]

Have you read the Forbes link you have given? In short it says government interventions didn't worked, but further exacerbated the situation.

Even if you are right, which I am sure you are not, a manipulated low priced stock would not remain low priced because it attracts investors to buy because of its low price in turn increase the demand for the stock and with the demand price too. Markets are self correcting.

As far as I know 'quotas' and 'stopping the trading' are meant to stop further slide in the market and not to keep the price down or for preventing if from overheating.

Of course a Forbes article is not going to praising government intervention. It is not in their interest to do so. I do believe I have explicitly stated in the previous post it is simply showing that government is indeed capable of influencing the stock market. Whether they do a good or bad job depends on the competency of the government, but influence is influence. If it can be influenced, then it simply mean you have to find the right input.

Overheating generally means there are excessive pricing in the stock market and the price increases uncontrollably in short period of time. Now, the price increase is still incremental. This means to reach that state, a large number of transactions must take place in short period of time. Quota limits the number of increments, this means it slows down the market, whether slide or rise.

Right now, Chinese stock market is due to go downward. Chinese central government's job is to make sure the slide is sufficient slow so everyone has time to adapt, just like the 2007 curb.

 

[Matrixx]

I hope USA is not doing the same what they did to USSR. Growing China is fine to them but not threatening China

 

[ito]

Guy, you make it complex, I am well in finance, but know a little, below is my opinion, if wrong, correct me:
1.what's stock market: Stock is a market, that let company collecting money for company developing through stock exchanging, first, stock itself is not unvalued, but because it can exchange, it has price, like currency.

2.The company which IPO get the first benifit from the stock market: When a company start IPO, the instituation(A) and public(B) can buy the share through Primary and secondary market that you said( Normal public can't buy it through Primary market), if the company have 1 million shares, assume that, each share's price is $20(In fact, in primary, you can get it cheaper, for simple, let's set it $20), and in fact, in the 1 million shares, many are owned by company owner, assume about 0.5 million, so the company get about 10 million$, instituation and public lost 10 million$, but they have shares.

then instituation and public exchange the share in the secondary market, if the share price up to 30$, C buy them, so till now: Company get 10 million, the A and B earn 5 million, the C spend 15 million on these, the C's wealth is distributed to Company, A, B, the whole wealth is 15 million( If you want caculate the 0.5 million shares owned by company owner, the whole value is from 20 million to 30 million).

Then if the share price to 10$, C sell it to D, C lost 5 million$,the price of 0.5 million shares is down from 15 million to 5 million right. is 10 million disappear, no one get it? I don't thing so, from IP, Company earn 10 million, A and B earn 5 million, D lost 10 million, and value of 0.5 million is 5 million: 10(Company earned) +5( A and B earned) = 10( D lost) + 5 (Value of 0.5 million). it is wealth transfer, not disappear.

The $3.7 trillion has been took by others before falling.

I will answer you in the morning. I am going for sleep.

 

[Götterdämmerung]

When people ask elementary questions such as double entry accounting, ledgers, journals, credit and debt etc...and then in the same breath write 'expert' shows how idiot one is.

LOL

Not only a wannabe expert that you are, but also lacking comprehension of English. Where did I say that I'm an expert?

How about I exposed you what you really are: a braggadocio.

Let me help you out. You paid 100 $ and gets a commodity that you thought was worth 100 $ but it turns out to be only worth 70 $, you lost 30 $, who gained 30 $ (actually it's more than that)? Got it, Mr. Wannabe-Expert?

 

[XiangLong]

When US abandon VN, then Nothing will change, we r so poor wt a long war and long sanction from US already,

And yet you want to join TPP?

 

[Providence]

I was very precise. Any expert would have understood me.

No you were far from precise. You just alluded to a term in accountancy which has absolutely no relation to stock markets much less the process of trading which is the subject of discussion here.

Now I can very well go on and make it appropriately evident with references that the term which u threw in the mix makes no sense and rather is reflective of your half knowledge.

But I would rather give you benefit of doubt and ask you to state again .. Do you have anything educative to share ?

 

[Götterdämmerung]

No you were far from precise. You just alluded to a term in accountancy which has absolutely no relation to stock markets much less the process of trading which is the subject of discussion here.

Now I can very well go on and make it appropriately evident with references that the term which u threw in the mix makes no sense and rather is reflective of your half knowledge.

But I would rather give you benefit of doubt and ask you to state again .. Do you have anything educative to share ?

Did you even read my first post in this thread? Also read posr #58.

 

[tranquilium]

You know it is a bubble,
When many Chinese stocks were trading at 80 times annual profit,
Its OK, when you have say 15-20 startups trading at that kind of PE,
When you have 150, then you are in serious trouble.

Funny thing is Many people in China Mortgaged their houses to buy stocks,
With 3.7 Trillion USD being wiped out,
I wonder how many Chinese are going to be homeless

Meh, 2007 was worse this the current plunge and the home ownership rate in China only went up afterwards. While I don't doubt there exists people stupid and greedy enough to mortgage their houses to buy stocks, but for those people, if they are not losing their house to the stock market, then they will still lose it to some other form of gambling. Fortunately, majority of people is not that stupid.

It is one of the situations that you have been through worse, so logically, a lesser event is not going to anything more.

Funny thing is Panic creates further Panic.
I won't be surprised to see 2-3 Trillion more being wiped out.

Basically, the entire population of China have lost 18% of their savings and assets value
In a matter of 21 days
Its like God Playing Black Jack, and now low cards are in the play
And all the chips are Chinese mortgages.

Why would the plunge be directly compared to personal savings and assets? According to the 2013 report on Shanghai index's investor report individual investors accounts for 7.5% of the total stock market value. So 18%*7.5%= 1.35% loss. I don't know about you, but while 1.35% of my savings is still a significant amount, but it is certainly not going to make me homeless

 

[Providence]

Let me help you out. You paid 100 $ and gets a commodity that you thought was worth 100 $ but it turns out to be only worth 70 $, you lost 30 $, who gained 30 $ (actually it's more than that)? Got it, Mr. Wannabe-Expert?

What you are talking about is currency which is not same as worth. Currency is just one-form of representation of worth.

When you lose money, it means the worth has been diminished. Doesn't mean someone flicked it.