‘Rats leaving a sinking ship’ as China’s equity bubble implodes

[Foggy_Bottom]

When does a stock market correction become a crash? Right about now if you’re sat in Shanghai watching the value of your portfolio disappears down the Yangtze River.

China’s main stock index is in freefall after enjoying a bull run that saw the Shanghai Composite gain 106pc in the past year on a wave of exuberance among investors lured by valuations, talk of initial public offerings and the expectation that Beijing will eventually launch a massive fiscal stimulus programme to boost the economy.

On Friday, the blue-chip CSI 300 index plummeted 7.8pc, while the smaller Shenzhen Composite declined by the same margin to post its lowest close since May. In the past two weeks around $1.2 trillion (£600bn) has been wiped off the value of Chinese listed companies since the market reached its peak on June 12.

Since the beginning of the year China’s stock market bubble has inflated to epic proportions as speculators piled in by borrowing money to buy stocks in ever larger volumes. At the beginning of the year, the value of outstanding loans used by securities firms to fund investment had swollen to exceed $260bn. By the beginning of this month that figure had grown to $364bn.

Many of those investments are now worth less than the value of the loan as more traders exit the market in order to cover margin calls on their outstanding debts. Given the scale of leveraging that underpins both the Shanghai and Shenzhen indexes, few experts are predicting that the current stocks rout will end until more of this debt is washed out of the system.

According to Augustin Eden at Accendo Markets: “It’s like rats leaving a sinking ship, and a terrible day for any investment trust dedicated entirely to long-term investments in mainland China.”

His view was shared by Jonathan Garner, head of Asia and emerging market strategy at Morgan Stanley in Hong Kong. He advises that now is not the time to buy into the dip in Chinese stocks, with the market teetering on the brink of entering bear territory.

Despite fears in Asia that the current standoff between Greece and its creditors could pose a wider risk for the global economy, it appears more likely that the real cause for the crash lies closer to home.

‘Rats leaving a sinking ship’ as China’s equity bubble implodes - Telegraph

 

[root]

Finally clown is back.Did you enjoy your Pentagon shoes polishing job while you were away?

 

[C130]

China is strong. they have what almost 4 trillion in FOREX. any downturnwould just be a minor blip and if it isn't well that's trouble for not only China, but the U.S and the rest of the world


a strong vibrant vigorous dragon is best for the world.

China is the dragon and the world economy is the dragon riders.

 

[Foggy_Bottom]

China is strong. they have what almost 4 trillion in FOREX. any downturnwould just be a minor blip and if it isn't well that's trouble for not only China, but the U.S and the rest of the world


a strong vibrant vigorous dragon is best for the world.

China is the dragon and the world economy is the dragon riders.

LOL. Mythical economy fits the bill.

Btw the 3 or 4 trillion reserves is looked at as overkill by economists and markets. At some point it becomes diminishing returns after a certain amount of reserves.

 

[[Bregs]]

Too much of foreign exchange reserves or too low both are not good for any economy

 

[hellraider]

China is deliberately inflating stock markets to increase consumer spending by wealth effect. But this bubble will crash & leave lot of debt for investors who are leveraged. Tough days ahead for China.

 

[TheFlyingPretzel]

ITT: Wishful Indian wet dreams.

Finally clown is back.Did you enjoy your Pentagon shoes polishing job while you were away?

This guy is a known idiot.

 

[C130]

LOL. Mythical economy fits the bill.

Btw the 3 or 4 trillion reserves is looked at as overkill by economists and markets. At some point it becomes diminishing returns after a certain amount of reserves.

mythical economy??

 

[jhungary]

Too much of foreign exchange reserves or too low both are not good for any economy

Too much forex reserve is a direct result from an export driven economy, A large forex reserve means lower value of their currency, simply the Chinese are taking in too much foreign investment and pumping out too many goods.

To a point the currency need to bounce back, hence the market compensate by bumping the stock market up, doing so will make the Chinese appear to have a larger national spending/trading or whatever you call it.

But this is actually extremely unhealthy to the market itself, as stock can only split up to a point, then they have to cool down to liquidate (People sell high) and when everybody have the same idea. Then...

The problem is, who is holding all the value of Chinese stock now. It make a lot different if it is local holding than foreign holding those stock.

 

[Foggy_Bottom]

mythical economy??

Much of it is based on numbers fabricated. Dont take my word on it. The Chinese government just under a year ago itself found out that because their party members progress is directly tied to economic data within provinces, there was rampant fabrication of the data. Ghost cities and their real estate being some indicators of how they have created an illusion. This article is yet another indicator. There is circa 2 trillion of their GDP which is suspect.

And as far as them crashing and the effect it will have, if it were to happen? Well, is not a doomsday scenario for the U.S. EU economy tells us that U.S can be very resilient. Lastly our(plus others) agenda towards India hints at where a substitute market is in play to counterbalance China.

I'd say given their propensity for economic espionage, their hegemony and bullying of fellow neighbours in south china sea, China is headed for sanctions in a decade or 15 years.

 

[21 Dec 2012]

That's a lot of fire for a diplomat (retired).

 

[TheFlyingPretzel]

That's a lot of fire for a diplomat (retired).

Diplomat? He's a fat, hopeless, South Indian bronie with an unhealthy penchant for anti-China and anti-Pakistan articles. My right toenail says he has Miley Cyrus shirts and his quiet time is spent wearing panties and nail polish.

That in return is reflected by his username. He's quite clearly pretending to have importance which nobody will actually ever ascribe to him. The anonymity of the internet serves him well and is his only solace.

Much of it is based on numbers fabricated. Dont take my word on it. The Chinese government just under a year ago itself found out that because their party members progress is directly tied to economic data within provinces, there was rampant fabrication of the data. Ghost cities and their real estate being some indicators of how they have created an illusion. This article is yet another indicator. There is circa 2 trillion of their GDP which is suspect.

And as far as them crashing and the effect it will have, if it were to happen? Well, is not a doomsday scenario for the U.S. EU economy tells us that U.S can be very resilient. Lastly our(plus others) agenda towards India hints at where a substitute market is in play to counterbalance China.

I'd say given their propensity for economic espionage, their hegemony and bullying of fellow neighbours in south china sea, China is headed for sanctions in a decade or 15 years.

Sanctions in 15 years? There's a greater chance you make something of your life. Now that's remote.

 

[C130]

Much of it is based on numbers fabricated. Dont take my word on it. The Chinese government just under a year ago itself found out that because their party members progress is directly tied to economic data within provinces, there was rampant fabrication of the data. Ghost cities and their real estate being some indicators of how they have created an illusion. This article is yet another indicator. There is circa 2 trillion of their GDP which is suspect.

And as far as them crashing and the effect it will have, if it were to happen? Well, is not a doomsday scenario for the U.S. EU economy tells us that U.S can be very resilient. Lastly our(plus others) agenda towards India hints at where a substitute market is in play to counterbalance China.

I'd say given their propensity for economic espionage, their hegemony and bullying of fellow neighbours in south china sea, China is headed for sanctions in a decade or 15 years.

you do make some good points, but china is strong and crafty.

 

[Sanchez]

I can see what low level US State Department could be or has been. US is a land of dreamers!!!

 

[Foggy_Bottom]

you do make some good points, but china is strong and crafty.

Crafty as a car salesman. It ain't fooling anyone.