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

[Aepsilons]

In any situation there will be winners as well as losers. It's a fact of life.

 

[Hamartia Antidote]

Lol you should tell that to the people who couldn't afford to pay their mortgages and went for selling their house but whoops found out it's only worth 1/3 of the price you bought it for and ended up on the streets

Same as the stock market. If you buy a home at way too high a price then you shouldn't be crying if it falls to a more reasonable level. Plus if you put almost no money down on the purchase (because you "deserve" a house even though you don't have any cash and your credit sucks) and find yourself underwater then shame on you. I put down 40% of the cost of my house when I bought it. If I followed their principles I could have purchased a house 10 times larger on "margin". Then get a sympathy bailout by the government because I was an unwitting "victim" of circumstances.

2008 wasn't even that bad, lol. And the U.S. Economy recovered by 2012. Don't you know that unemployment in the U.S. Is less than 5% now? Below pre-2008 levels actually.

I think wages are still stagnant.

 

[jhungary]

Any institution that collects money from public such as mutual funds, pension funds, or sovereign wealth funds cannot indulge in speculative investment strategies. Hedge funds manage private money.

Lol, I am actually waiting on how long before that dude blame the US Federal Reserve for short changing the CHinese Stock Market and make an arse out of him. Stop correcting him lol

 

[Icewolf]

Same as the stock market. If you buy a home at way too high a price then you shouldn't be crying if it falls to a more reasonable level. Plus if you put almost no money down on the purchase (because you "deserve" a house even though you don't have any cash and your credit sucks) and find yourself underwater then shame on you. I put down 40% of the cost of my house when I bought it. If I followed their principles I could have purchased a house 10 times larger on "margin". Then get a sympathy bailout by the government because I was an unwitting "victim" of circumstances.



I think wages are still stagnant.

Sub prime mortgages are what caused that...

 

[tranquilium]

"Unprecedented"? I linked this a week ago and didn't think I needed to post this again.

The Chinese stockmarket took the same dive and from a higher value at 2007. While a memory span of 8 years is wonderful for a goldfish, if you are a human being and trying to predict the economy, then you are in serious trouble if you can't even remember something that happened 8 years ago.

It seem Chinese stock markets are not reflecting the value of their companies correctly. Not a good sign for Chinese economy as a whole.

Chinese stock market haven't been reflecting the Chinese companies' value since the 90s. Policy set by Chinese government is one of the major factor that control the Chinese stock price and it has been kept artificially low for a very long time due to the need to prevent stock market sucking capital from the industry. This is not exactly a secret and anyone who is familiar with Chinese stock markets should know this.

 

[ito]

Panic wipes £2tn off Chinese shares

Panic wipes £2tn off Chinese shares | Business | The Guardian

 

[TaiShang]

The Chinese stockmarket took the same dive and from a higher value at 2007. While a memory span of 8 years is wonderful for a goldfish, if you are a human being and trying to predict the economy, then you are in serious trouble if you can't even remember something that happened 8 years ago.

Well, "unprecedented" only for the purpose of convenience.

 

[ito]

Chinese stock market haven't been reflecting the Chinese companies' value since the 90s. Policy set by Chinese government is one of the major factor that control the Chinese stock price and it has been kept artificially low for a very long time due to the need to prevent stock market sucking capital from the industry. This is not exactly a secret and anyone who is familiar with Chinese stock markets should know this.

Governments can manipulate currencies, but not stock markets. The price of a stock is determined by the demand and supply of a stock. The stock prices cannot be kept artificially low. Stock markets don't operate that way.

 

[ito]

Panic sets in as Shanghai Composite drops 30pc, $3.7 trillion wiped of China share market despite crackdown
PM
By business reporter Sue Lannin
Updated yesterday at 2:46pm



It plunged by nearly 6 per cent on Friday in another volatile day of trade.

But AMP Capital chief economist Shane Oliver is optimistic and described it as correction, not a crash.

"We've already had quite a sharp fall, I don't think we'll see a crash in the Chinese share market," Mr Oliver told PM.

"It's not dramatically overvalued.

"What I think we are seeing here is a correction.

"It rose too far too fast over the last 12 months, up 140 per cent, just went up there too quickly."

'The stock market can go lower'
Chinese regulators are investigating market manipulation and short selling, when investors borrow shares to sell in the hope of buying them back at a profit.

They have also said they will protect investors against what they call sales violations on investment products.

This week, regulators relaxed restrictions on margin lending and cut interest rates to try and stop the share market decline.

I don't think its a risk to the Chinese financial system... It is securities firms who are dominant in the margin lending sphere

Westpac senior international economist Huw McKay


Chris Weston, the head of research at IG Markets, said efforts by Chinese authorities to stem the falls have not worked so far.

"We're even hearing now that they are allowing people to use housing as collateral for financing, so you can really bet your house on the stock market, which sounds like it could end very much in tears," he said.

"I think what we seeing now is a major deleveraging going through.

"The stock market for me looks like it can go lower."

The big rise on Chinese share markets over the past year has been driven by the popularity of margin loans in China, loans taken out by investors to buy shares, a move encouraged by the Chinese government to develop equity markets.

Some estimates put the value of margin loans at as much as $US645 billion.

Traders are now calling in some of those loans because of fears that stocks are overvalued.

But Huw McKay, senior international economist at Westpac, does not think it is a threat to the Chinese financial system because most margin lending is done by the private sector.

"I don't think its a risk to the Chinese financial system," he said.

"It is securities firms who are dominant in the margin lending sphere.

"The core of the banking system is relatively untouched here."

Panic sets in as Shanghai Composite drops 30pc, $3.7 trillion wiped of China share market despite crackdown - ABC News (Australian Broadcasting Corporation)

 

[tranquilium]

Governments can manipulate currencies, but not stock markets. The price of a stock is determined by the demand and supply of a stock. The stock prices cannot be kept artificially low. Stock markets don't operate that way.

Actually, government can do plenty about the stock price. For example, they can put a quota on daily trading volume of a certain stock. Temporarily suspend it for a variety of purposes and reasons. Publicly support certain company. Starting national projects concerning certain sector. The list goes on and on.

Take the keeping stock artificial low part for example, in 2008, Chinese central government kept it low by controlling it through budgetary assignment of new projects, lending policies to specific industries and monetary policies. These polices managed to suppress the price of a lot of hot stocks in the market and shifts capital somewhere else.

Currency is actually harder to manipulate because it has a much broader impact than stocks and by default involves foreign organizations. Stock market, on the other hand, is much more affected by domestic policies and easier to influence.

 

[TaiShang]

Actually, government can do plenty about the stock price. For example, they can put a quota on daily trading volume of a certain stock. Temporarily suspend it for a variety of purposes and reasons. Publicly support certain company. Starting national projects concerning certain sector. The list goes on and on.

Take the keeping stock artificial low part for example, in 2008, Chinese central government kept it low by controlling it through budgetary assignment of new projects, lending policies to specific industries and monetary policies. These polices managed to suppress the price of a lot of hot stocks in the market and shifts capital somewhere else.

Currency is actually harder to manipulate because it has a much broader impact than stocks and by default involves foreign organizations. Stock market, on the other hand, is much more affected by domestic policies and easier to influence.

It's a 10% correction after a massive rise from August last year. The FXI ETF whichs tracks the Chinese stock market went up from $40 to as high as $55 from Aug last year to now. A correction is normal, if anything this is a sign of a bullmarket in Chinese equities.

 

[tranquilium]

It's a 10% correction after a massive rise from August last year. The FXI ETF whichs tracks the Chinese stock market went up from $40 to as high as $55 from Aug last year to now. A correction is normal, if anything this is a sign of a bullmarket in Chinese equities.

The Shanghai index would probably continue to fall for the next few month. One of the most important lesson to learn when trading in China is that it is ill advised to go against the central government's economic policies.

Unlike a large number of nations in the world, the Chinese domestic industry is large and advanced enough that its self momentum is sufficient to change market trend and as the leading engine of the Chinese industry, Chinese government's policies are sufficiently influential to make any decision it makes to become self-fulfilling prophecies. Basically, this is one of the scenarios where the ordinary fishes flow with the current, a powerful enough fish will make its own current.

This is on top of the fact Chinese political system is also a highly centralized socialist system where the government is a lot more powerful than your average nation's government in economic activities of the nation.

The current economic policy of the Chinese government is industrial re-structuring towards the upper spectrum of the market. Hence appropriate cash flow would be directed towards those sectors. The current over-heating stock market is simply sucking up too much of the capital, so it will have to come down, one way or another.

 

[ito]

Actually, government can do plenty about the stock price. For example, they can put a quota on daily trading volume of a certain stock. Temporarily suspend it for a variety of purposes and reasons. Publicly support certain company. Starting national projects concerning certain sector. The list goes on and on.

Take the keeping stock artificial low part for example, in 2008, Chinese central government kept it low by controlling it through budgetary assignment of new projects, lending policies to specific industries and monetary policies. These polices managed to suppress the price of a lot of hot stocks in the market and shifts capital somewhere else.

Currency is actually harder to manipulate because it has a much broader impact than stocks and by default involves foreign organizations. Stock market, on the other hand, is much more affected by domestic policies and easier to influence.

Government can put quota on the whole stock market or temporarily suspend trading when markets are falling free. Those things temporary halt the the sliding of market index, but they cannot determine the pricing of individual stock. Stock price fall because an investor expect lesser returns in future from that stock than his/her required huddle rate and he/she sells the stock to save his future losses

Also government is market maker and not a market player hence cannot intervene on behalf of certain stocks as you have implied.

Currencies price can be manipulated because both monetary and fiscal policies are in hand of the governments, moreover government can print currency. China is a good example. China has deliberately kept its currency low for many years to boost its exports.

 

[MastanKhan]

2008 wasn't even that bad, lol. And the U.S. Economy recovered by 2012. Don't you know that unemployment in the U.S. Is less than 5% now? Below pre-2008 levels actually.


Let's get American take in this.

@LeveragedBuyout @Peter C @Syed.Ali.Haider @MastanKhan @AMDR @F-22Raptor

Hi,

2008 was not bad---tell me about it. How I made it out in one piece---I do not know---but it was very close----. So many tragedies----so many tragic endings for whole families.

 

[The Huskar]

30% seems a little way past correction,I think.