China Trade Halts Locks Up $2.2 Trillion of Shares, Freezing Market(bloomberg.com)
bloomberg.com
China Trade Halts Locks Up $2.2 Trillion of Shares, Freezing Market
http://www.bloomberg.com/news/articles/2015-07-08/china-trade-halts-hit-2-2-trillion-as-state-intervention-fails
137 comments
It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.
As of the open today, ChiNext was down 41% in a month.
As of right now, 90% of China's entire stock market is frozen. It's absolutely a 1929 style disaster. Were the authorities not stepping in constantly, the carnage would be far worse already - which is another way of saying, eventually it will get there no matter what they do.
http://www.bloomberg.com/quote/SZ399006:IND
As of right now, 90% of China's entire stock market is frozen. It's absolutely a 1929 style disaster. Were the authorities not stepping in constantly, the carnage would be far worse already - which is another way of saying, eventually it will get there no matter what they do.
http://www.bloomberg.com/quote/SZ399006:IND
The 10% limits on falls each day are horrible this way. It actually creates a continually falling market, we won't know how bad this crash really is for awhile.
Do they also have limits on 10% rise each day?
Yes, stocks can only climb by 10% max per day.
That led to some bizarre circumstances, where new IPOs during the upside mania were going up by the limit every day for weeks after the IPO.
That led to some bizarre circumstances, where new IPOs during the upside mania were going up by the limit every day for weeks after the IPO.
Yes, the blue chips that the government is pumping money into are bumping up against those limits also. Really really messed up.
30% in less than a month, compared to 90% over 3 years.
If you're comparing apples to apples (first few weeks of the American crash of 1929 to the current Chinese crash) the numbers look very similar.
If you're comparing apples to apples (first few weeks of the American crash of 1929 to the current Chinese crash) the numbers look very similar.
The Chinese stock market hassufefred rampant manipulation to ramp it up, and is now correcting itself. Even with the steep drops so far it's still well up over the last 12 months, after all. All this means is that those rises were not justified and are being wound down. The government's panicked response isn't helping, and the fall may well be more severe than the economic realities justify, but what's new?
There is no severe immediate risk of a depression in China. Their stock market is relatively very small compared to their economy as a whole and Chinese firms as a whole are nowhere near as dependent on it for raising capital as in western countries. Therefore the ammount of damage any fall in the stock market can do to the Chinese economy is fairly low.
The Chinese leadership has staked a lot of it's credibility and prestige on the rises in the stock market, as evidence of it's good economic management. As a result they, and anyone wantign to curry favour with them, were hyping up the market and blowing air into the bubble as hard as they could. Bad mistake. They'll learn.
There is no severe immediate risk of a depression in China. Their stock market is relatively very small compared to their economy as a whole and Chinese firms as a whole are nowhere near as dependent on it for raising capital as in western countries. Therefore the ammount of damage any fall in the stock market can do to the Chinese economy is fairly low.
The Chinese leadership has staked a lot of it's credibility and prestige on the rises in the stock market, as evidence of it's good economic management. As a result they, and anyone wantign to curry favour with them, were hyping up the market and blowing air into the bubble as hard as they could. Bad mistake. They'll learn.
I hope you're right. But reading about firms that are raising loans with their stock as collateral. .. shall we say while staying true to your point are perhaps nevertheless even more exposed than your model's worst case. Only time will tell.
Sure, you're right to be concerned, it's no picnic. Some companies will go bust, and some investors will lose their shirts. It will hurt. It's not yet a systemic risk though. Of course the more the Chinese government panicks and tries to manipulate the market back up again, the worse it will get but right now it doesn't have to be all that bad.
[deleted]
From the wikipedia page about the 1929 crash ... this part was very telling:
"The market would not return to the peak closing of September 3, 1929 until November 23, 1954."
"The market would not return to the peak closing of September 3, 1929 until November 23, 1954."
Also interesting to contemplate the influence of WW2 in that fact. I think I generally hear that WW2 was a big booster of economic growth, so how long would it have taken without the war?
A glib way of answering this is to look at how much of U.S. GDP went to military spending. It was extremely high during the war and has remained at a higher average level ever since - thus Eisenhower's "military-industrial complex" remarks at the end of his term.
Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown.
That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown.
That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
I think it's a great example of why it's important to try to not judge history. The complications in this one scenario are just so fascinating, yet it's important to resist trying to tie it up in a neat bow.
Plus a lot of the world was destroyed outside of the US ... leading to the post war boom here.
I've read it. Galbraith's history is ok and his writing is entertaining but his economic analysis is terribly flawed. I recommend Rothbard's America's Great Depression for a solid economic analysis of the causalities involved in taking a market crash and turning it into a depression. The book is available in pdf free online:
https://mises.org/library/americas-great-depression
Honest question: reading the "Political activism" section of the author's wikipedia article[1] gives me no hope of an unbiased analysis of the situation. In the book, does he try to give a balanced view, or is it a reflection of his own views as an anti-statist Austrian School economist?
[1] https://en.wikipedia.org/wiki/Murray_Rothbard#Political_acti...
[1] https://en.wikipedia.org/wiki/Murray_Rothbard#Political_acti...
It's applied Austrian Economics (what they call history as opposed to theory). It's a pretty good read even if you think Austrians are crackpot-crazy. The train of thought is pretty logically structured.
I'm not really aware of a balanced view on the topic so it's a decent idea to start just reading the different views in extreme.
I'd also recommend Friedman's "A Monetary History of the United States" (with a part about the Great Depression) for a Monetarist POV.
"The Great Crash, 1929" by Galbraith provides yet another (institutionalist/Post-Keynesian) POV.
Rothbard was a pretty good scholar even if you completely disagree with him. His "An Austrian Perspective on the History of Economic Thought" is a pretty good and well researched set of books.
I'd also recommend Friedman's "A Monetary History of the United States" (with a part about the Great Depression) for a Monetarist POV.
"The Great Crash, 1929" by Galbraith provides yet another (institutionalist/Post-Keynesian) POV.
Rothbard was a pretty good scholar even if you completely disagree with him. His "An Austrian Perspective on the History of Economic Thought" is a pretty good and well researched set of books.
Thank you!
"... but his economic analysis is terribly flawed."
I doubt that an analysis from the Mises institute is going to enlighten us here. Austrian economics is interesting but fails on long term analysis and deeper insights due to Mises flawed understanding of Money.
A former Austrian...
I doubt that an analysis from the Mises institute is going to enlighten us here. Austrian economics is interesting but fails on long term analysis and deeper insights due to Mises flawed understanding of Money.
A former Austrian...
Not as an attack but a real question: Please expand on "Mises flawed understanding of Money."
I can't. The major book that I would recommend is not available in English.
These are a few links I have posted several times on HN:
"There is No Steady State Economy (except at a very basic level)" http://ourfiniteworld.com/2011/02/21/there-is-no-steady-stat...
Limits to Growth–At our doorstep, but not recognized http://www.resilience.org/stories/2014-02-12/limits-to-growt...
Wealth And Energy Consumption Are Inseparable http://www.declineoftheempire.com/2012/01/wealth-and-energy-...
Maybe you can grab a few ideas. A gold backed currency would make no difference. The driving force of capitalism is debt. Debt that needs to be served with more debt (there is no treasure box in the cellar of General Motors that they can use to build car manufacturing plants). To keep the system running you have to continuously create more debt. To be able to do this, you need to have a growing economy, for the economy to grow, you need more energy. To make things worse, this grows exponentially. This is not bad in itself, it has enabled capitalism based economy a tremendous dynamic in the last 150 years.
The Problem: Nothing that growth exponentially can grow very long and nobody has ever been able to show how a system that does not grow anymore or does not create new (higher) debt anymore can work. ("There is no steady state economy").
These are a few links I have posted several times on HN:
"There is No Steady State Economy (except at a very basic level)" http://ourfiniteworld.com/2011/02/21/there-is-no-steady-stat...
Limits to Growth–At our doorstep, but not recognized http://www.resilience.org/stories/2014-02-12/limits-to-growt...
Wealth And Energy Consumption Are Inseparable http://www.declineoftheempire.com/2012/01/wealth-and-energy-...
Maybe you can grab a few ideas. A gold backed currency would make no difference. The driving force of capitalism is debt. Debt that needs to be served with more debt (there is no treasure box in the cellar of General Motors that they can use to build car manufacturing plants). To keep the system running you have to continuously create more debt. To be able to do this, you need to have a growing economy, for the economy to grow, you need more energy. To make things worse, this grows exponentially. This is not bad in itself, it has enabled capitalism based economy a tremendous dynamic in the last 150 years.
The Problem: Nothing that growth exponentially can grow very long and nobody has ever been able to show how a system that does not grow anymore or does not create new (higher) debt anymore can work. ("There is no steady state economy").
Have a look at the chart - http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r... -
From Oct 2008 to Oct 2009 the SSE dropped from almost 6,000 to 1,700 (after it rose from 1,800 to 6k the year before).
Artificial bubble created by many different factors one being the limitations for Chinese investors / money to go abroad.
So we've seen much worse or the same in 2007 / 2009.
From Oct 2008 to Oct 2009 the SSE dropped from almost 6,000 to 1,700 (after it rose from 1,800 to 6k the year before).
Artificial bubble created by many different factors one being the limitations for Chinese investors / money to go abroad.
So we've seen much worse or the same in 2007 / 2009.
The Great Crash comparisons are tiresome not simply because of the difference scale so far but because history is full of crashes, some with 1929 outcomes, some with other outcomes - well, naturally all fairly bad in the short run but still with important differences. Japan's meltdown in '89, the little Dragon's crash, the 2006-8 crash, etc, etc.
Given that Chinese investors have been buying significant amounts of real estate abroad (http://uk.reuters.com/article/2014/07/30/uk-china-property-o...), does anyone have any idea what this will mean for housing in other countries?
Higher house prices? (Chinese bears fleeing to overseas property like American bears flee to gold)
Lower house prices? (Chinese investors attempting to recoup their losses/keep enough cash on hand to pay their debts and other obligations)
Neither/something else? (perhaps Chinese real estate investment has a negligible effect on house prices)
This is a significant question for me because house prices in the UK are far too high for my partner and I to have much chance of ever buying a property, at present, even with a very healthy deposit.
Higher house prices? (Chinese bears fleeing to overseas property like American bears flee to gold)
Lower house prices? (Chinese investors attempting to recoup their losses/keep enough cash on hand to pay their debts and other obligations)
Neither/something else? (perhaps Chinese real estate investment has a negligible effect on house prices)
This is a significant question for me because house prices in the UK are far too high for my partner and I to have much chance of ever buying a property, at present, even with a very healthy deposit.
Chinese buyers have a much bigger impact on the western coasts of the US and Canada (Vancouver specifically) than they do in the UK. Foreign buyers in the UK are mostly European or from the Middle East and conditions in both places are probably making people favor parking capital in the UK.
If you are Chinese and able to get your money out of the country and into foreign property you would probably hold on to that property for as long as you possibly can; by being outside of China it is worth far more than anything you might use to cover domestic debt.
If you are Chinese and able to get your money out of the country and into foreign property you would probably hold on to that property for as long as you possibly can; by being outside of China it is worth far more than anything you might use to cover domestic debt.
We'll get to find out if these houses have been bought using laundered cash or if the owners are using financing dependent on foreign income.
If these houses are largely investment properties purchased to hedge against the home market, then it's more likely the former.
I expect we will see higher housing prices as the rich try harder to move more of their money out of China.
If these houses are largely investment properties purchased to hedge against the home market, then it's more likely the former.
I expect we will see higher housing prices as the rich try harder to move more of their money out of China.
The buying power of Chinese consumers already pushed up price for many things, from commodity to luxury goods to real estates. It is unavoidable nature of society growth. This has very little to do with Chinese investors. Very few people got rich through stock market in China (probably the same everywhere).
>> “The market has failed,” said Hao Hong, a China strategist at Bocom International Holdings Co ...
In his view the market would "succeed" if it would always go up? Strategist? Seriously?
>> ...failed to revive confidence among stock investors...
Depends on which side of trade you are. Investors who are put holders are not complaining ...
In his view the market would "succeed" if it would always go up? Strategist? Seriously?
>> ...failed to revive confidence among stock investors...
Depends on which side of trade you are. Investors who are put holders are not complaining ...
>In his view the market would "succeed" if it would always go up? Strategist? Seriously?
No, I think the Chinese genuinely believed the stock market would channel the excess savings that households have into private and public companies in a controlled manner. There is a genuine mismatch, the households save more than 30% with no place to invest while the corporate sector is burdened with debt thanks to overgenerous lending after the financial crisis.
What was supposed to be a gradual 15-20 year stock rise and conversion of debt into equity has become a boom and bust in a year or so. It also looks like a lot of small time investors piled on at the peak and might be looking at large losses. So kind of sucks for the small time Chinese investor who was looking for some growth (since they cannot invest anywhere else - property is already bust)
No, I think the Chinese genuinely believed the stock market would channel the excess savings that households have into private and public companies in a controlled manner. There is a genuine mismatch, the households save more than 30% with no place to invest while the corporate sector is burdened with debt thanks to overgenerous lending after the financial crisis.
What was supposed to be a gradual 15-20 year stock rise and conversion of debt into equity has become a boom and bust in a year or so. It also looks like a lot of small time investors piled on at the peak and might be looking at large losses. So kind of sucks for the small time Chinese investor who was looking for some growth (since they cannot invest anywhere else - property is already bust)
I have a simple rule for investment opportunities - if you hear about it in mainstream press, it's already too late to invest
And when it makes the cover of Time, short it to the ground.
This could be my next project. Thanks for the idea. This will be fun.
Maybe also consume Twitter's firehose and use some combination of frequency of mention + some kind of influencer score (e.g., "verified" accounts and accounts with lots of followers are more heavily weighted) to determine hype. I've been wanting to built a sentiment analysis system for trading for a while now.
Bitcoin comes to mind here.
I almost made that mistake. I'd heard about it on Reddit way back when prices were $1/coin. Largely ignored it.
Next I hear it, it's on TechCrunch. Then on HuffPo.
I almost bought 10 coins at $500/coin.
By the time it hit NYT, it was $1k/coin
We all know how that story played out. Still kick myself for not buying like 10,000 of them at $1 though
Next I hear it, it's on TechCrunch. Then on HuffPo.
I almost bought 10 coins at $500/coin.
By the time it hit NYT, it was $1k/coin
We all know how that story played out. Still kick myself for not buying like 10,000 of them at $1 though
I had been messing around with Bitcoin in late 2010, early 2011. I gave away the five bitcoins I had towards the end of 2011. :(
> households save more than 30% with no place to invest while the corporate sector is burdened with debt
So what the Chinese are proposing is not exactly an investment, it is a transfer of debt from companies to individuals. Anyway, doesn't seem like an idea that would work -- investing in failing companies is a recipe for disaster.
So what the Chinese are proposing is not exactly an investment, it is a transfer of debt from companies to individuals. Anyway, doesn't seem like an idea that would work -- investing in failing companies is a recipe for disaster.
Same thing that happens everywhere: in 2008 in USA, in 2012 in Cypurs and now in Greece.
This sounds like a conspiracy theory to me. The only way you could transfer money from households to corporations via stock would be if the households bought IPO stock. Once a stock is sold through the IPO, it doesn't matter what the price is, the company doesn't get any of that money.
Companies issue stock all the time for various needs, such as compensation and purchases of other entities or even additional market offerings...
The stock market can support more and bigger IPOs the higher the stock prices are. Companies can also issue more stock offerings as their stock price goes up to get access to that household savings.
[deleted]
It's not clear from that quote if the analyst is referencing the market decline or the freezing of funds in over a thousand stocks and/or actions taken by the government to attempt to control the market.
The thing you got to wonder about is : they're trying to stop a panic. Is this going to stop the panic or reinforce it ?
My money's on reinforce. And it's (thankfully) out of China.
My money's on reinforce. And it's (thankfully) out of China.
well this is a clear signal that Chinese government has failed to control the stock market. I can't believe how naive they were thinking they could control something that is traditionally found only in non-command economies.
My guess is that they are going to come up with some bullshit like foreigners are driving down the stock prices, blame the Western devils for being homeless.
Well, it's not like people are going to go up to arms about it, it is a communist country after all, and we've seen how well Soviet Union did in keeping people in check even at the shittiest time.
My guess is that they are going to come up with some bullshit like foreigners are driving down the stock prices, blame the Western devils for being homeless.
Well, it's not like people are going to go up to arms about it, it is a communist country after all, and we've seen how well Soviet Union did in keeping people in check even at the shittiest time.
>it is a communist country after all,
That's like saying the Democratic People's Republic of North Korea is 'Democratic'. Which is to say, it's totally not.
They might call themselves that, but for the last few decades China has been communist in name only. It's far more capitalist than any western country I've lived in.
That's like saying the Democratic People's Republic of North Korea is 'Democratic'. Which is to say, it's totally not.
They might call themselves that, but for the last few decades China has been communist in name only. It's far more capitalist than any western country I've lived in.
> >it is a communist country after all,
> That's like saying the Democratic People's Republic of
> North Korea is 'Democratic'. Which is to say, it's totally > not.
I would not bet on this. They still have (opposed to for example the US) the idea of increasing the living conditions for all Chinese. They are quite homogeneous (Yes, I know, Han Chinese are the majority), have a strong cultural identity and identify with their country (not necessary with their government). The huge discrepancies in wealth could be easily reversed after the market economy did it's deed. I think this is one reason why all rich Chinese want to get their wealth out of the country ASAP.
I would not bet on this. They still have (opposed to for example the US) the idea of increasing the living conditions for all Chinese. They are quite homogeneous (Yes, I know, Han Chinese are the majority), have a strong cultural identity and identify with their country (not necessary with their government). The huge discrepancies in wealth could be easily reversed after the market economy did it's deed. I think this is one reason why all rich Chinese want to get their wealth out of the country ASAP.
> The huge discrepancies in wealth could be easily reversed
I don't think it could easily be reversed - you'd need a revolution. Not only because the higher ups have far too much skin in the game to want to reverse a system that generates huge wealth for themselves and their entire families, but they also know that the country needs capitalism and a market economy.
At the end of the cultural revolution, they also knew that after decades of proclaiming the evils of capitalism, it'd be a tough sell to the general population to just suddenly about face and say 'oops we were wrong, capitalism is good after all' and so we have 'socialism with Chinese characteristics' and a bunch of other things that are basically rebranded capitalism and that gives the general populace a warm fuzzy feeling without associating it with any of the cultural baggage terms like 'capitalism' have in Chinese society.
I don't think it could easily be reversed - you'd need a revolution. Not only because the higher ups have far too much skin in the game to want to reverse a system that generates huge wealth for themselves and their entire families, but they also know that the country needs capitalism and a market economy.
At the end of the cultural revolution, they also knew that after decades of proclaiming the evils of capitalism, it'd be a tough sell to the general population to just suddenly about face and say 'oops we were wrong, capitalism is good after all' and so we have 'socialism with Chinese characteristics' and a bunch of other things that are basically rebranded capitalism and that gives the general populace a warm fuzzy feeling without associating it with any of the cultural baggage terms like 'capitalism' have in Chinese society.
It is called peoples republic(!) of China. As for communism, they play that card whenever it suits them.
They've already blamed Morgan Stanley, Goldman Sachs, and Soros for having a role:
"In the past few days, rumors have circulated on the Wechat messaging service that “international capital” — or simply capitalism itself — was attacking China. Goldman Sachs and the Hong Kong office of China Southern Asset Management were supposed to be profiting from short-selling the market – rumors that were later rubbished by the China Securities Regulatory Commission. On Thursday, Chinese media also implied that George Soros or Morgan Stanley might be to blame."
https://www.washingtonpost.com/blogs/worldviews/wp/2015/07/0...
"In the past few days, rumors have circulated on the Wechat messaging service that “international capital” — or simply capitalism itself — was attacking China. Goldman Sachs and the Hong Kong office of China Southern Asset Management were supposed to be profiting from short-selling the market – rumors that were later rubbished by the China Securities Regulatory Commission. On Thursday, Chinese media also implied that George Soros or Morgan Stanley might be to blame."
https://www.washingtonpost.com/blogs/worldviews/wp/2015/07/0...
>They've already blamed Morgan Stanley, Goldman Sachs, and Soros for having a role
And how is this any different than what the Americans do: blame the bankers for all their financial problems?
And how is this any different than what the Americans do: blame the bankers for all their financial problems?
Foreigners can't invest in China's stock market.
That's true, but, you can bet against it in the NYSE Arca
http://www.google.com/finance?q=NYSEARCA%3AYANG
Sure we can. As long as we earn RMB and live in China, not that this tempts me.
Applying the principle of charity[0], I interpreted "foreigner" in this context as:
>Foreigner may refer to: Alien (law), a person in a country who is not a citizen or permanent resident of that country.[1]
If someone earns RMB and lives in China, then presumably they're either a citizen or a permanent resident.
[0] https://en.wikipedia.org/wiki/Principle_of_charity
[1] https://en.wikipedia.org/wiki/Foreigner
>Foreigner may refer to: Alien (law), a person in a country who is not a citizen or permanent resident of that country.[1]
If someone earns RMB and lives in China, then presumably they're either a citizen or a permanent resident.
[0] https://en.wikipedia.org/wiki/Principle_of_charity
[1] https://en.wikipedia.org/wiki/Foreigner
Oh, the Chinese definitely don't see it that way. I'm sure my Chinese name is laowai because that is what I'm called everywhere.
I'm neither a citizen, nor a permanent resident. The Chinese don't hand out greencards easily (maybe a few hundred a year) and even then often only to people of Chinese descent.
I'm neither a citizen, nor a permanent resident. The Chinese don't hand out greencards easily (maybe a few hundred a year) and even then often only to people of Chinese descent.
So... I earn RMB and live in China... but I'm totally a foreigner. In fact, foreigners can't really become permanent residents of China, especially if you're not of Chinese descent.
I never heard about this. As far as I know you need to be Chinese to buy A-Shares. Having RMB or being paid in RMB is irrelevant since even a tourist can open a bank account in China or HK.
Please elaborate in this.
Please elaborate in this.
I think if you present your income tax receipts (your money was earned in China), as long as the money is earned in China. there are all sorts of problems that go away with income tax receipts since not any tourist can get a job and earn money domestically.
Not advocating but I think you can invest in ETFs that track indexes like MCHI and ASHR.
You can since the SH-HK stock connect went live.
Yes,
You get the feeling that the people manipulating the markets are ignorant of the basic psychology involved here.
The proper way to do this is to officially say: "We believe in letting markets find their value and we believe they are sounder than many think" while unofficially pumping money in like crazy.
It gives me the impression the credibility of the "new Mandarin" approach of China's rulers is being torn to shreds. Not sure what the upshot will be.
You get the feeling that the people manipulating the markets are ignorant of the basic psychology involved here.
The proper way to do this is to officially say: "We believe in letting markets find their value and we believe they are sounder than many think" while unofficially pumping money in like crazy.
It gives me the impression the credibility of the "new Mandarin" approach of China's rulers is being torn to shreds. Not sure what the upshot will be.
> Not sure what the upshot will be.
China's rulers will also be torn to shreds?
China's rulers will also be torn to shreds?
Never happen. Too many tanks.
Thats what Ceaușescu thought until the' army rebelled and staged a quick drumhead court and fireing squad.
[deleted]
The Chinese military drive the tanks, not the CCP leadership.
The Chinese military and the CCP are two aspects of the same thing. It may not be the CCP leadership driving the tank, but the tanks are commanded by a CCP party member; it's CCP leadership directing the tanks.
The Chinese military is not a separate military in the way we think of it in the West. They are the armed wing of the Chinese communist party. An enormous amount of time is spent on political indoctrination; not just when joining the PLA, but continuing throughout one's time in the PLA. Senior military commanders are senior party members. The PLA does not stand for the the Chinese constitution or the Chinese people, but for the CCP, of which they are an integral part.
The Chinese military is not a separate military in the way we think of it in the West. They are the armed wing of the Chinese communist party. An enormous amount of time is spent on political indoctrination; not just when joining the PLA, but continuing throughout one's time in the PLA. Senior military commanders are senior party members. The PLA does not stand for the the Chinese constitution or the Chinese people, but for the CCP, of which they are an integral part.
The military is governed by CCP, not the conuntry.
"China's military said on Sunday it must be governed by the ruling Communist Party and not succumb to "liberal" voices who wish to challenge the party's control." [1]
[1] http://www.reuters.com/article/2015/06/07/us-china-defence-i...
The Chinese military knows who pays their checks.
Well, I dunno. The Soviet military refused to back the Communist Party in 1991; Churchill wrote that the German military was planning to overthrow Hitler in 1938 in what they thought was the likely scenario of his policies resulting in the UK and France entering into a war with Nazi Germany. So it all depends.
But did the communist party refuse to back the communist party? Because the PLA is part of the CCP. It's not a separate military. It's the armed wing of the Chinese Communist Party. Senior PLA officers are senior party members. The PLA, by design, owes its first loyalty not to the people, or the law, or the constitution, but to the CCP. Significant political education goes on, permanently, to keep it this way.
I'm not saying it's impossible, but it wouldn't be a military coup; it would be the CCP splitting and turning on itself.
I'm not saying it's impossible, but it wouldn't be a military coup; it would be the CCP splitting and turning on itself.
[deleted]
This is a deflationary spiral playing out in a predictable manner. First commodities declined, hard. Balance sheets and earnings fell. Real estate falling. Equities now rocked, the effect amplified by fear and increasing uncertainty. There is about 2 trillion of US dollar reserves on China's balance sheet, and I am guessing that number will decline by half in the months, possibly years to come.
What would you expect to occur in terms of impact to the US and rest of the world?
China probably will liquidate treasury holdings to fund their margin bank and other stimulus, and they will do it at a loss because global uncertainty is forcing yields down. Put simply, a lot of USD sequestered on China's balance sheet will find its way back into global commerce. Thankfully.
Serious question: How difficult is it to short the entire Shanghai Composite Index? Would it even be possible to place a trade?
Good luck. The premium to borrow shares is very high right now.
And with the Chinese government saying they're going to support the market, I wouldn't want to be short.
And with the Chinese government saying they're going to support the market, I wouldn't want to be short.
I would buy put options instead of a naked short. I know it looks like an easy trade right now, but the Chinese govt. can be unpredictable. Even if you're right over a 6 month period, you can still blow up in the short term
Yes, be careful. Just two months ago HN:ers were asking how to get in on Chinese stocks as they were going up 10% every day: https://news.ycombinator.com/item?id=9471858
Understood. Thank you
You can buy $YANG ETF. FTSE China Bear 3X Shares
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ASHR is the etf with the most liquidity.
Thank you for bringing this to my attention... second question: Why isn't everyone and their sister shorting the Asian market right now? Or are they?
CHAD is a 1x inverse ETF that tracks the CSI 300 and has performed as expected in this environment. Note, if more and more people pile in to take advantage of the situation, it will almost certainly trade at a premium to NAV. This should not happen in an ETF to due the creation/redemption mechanism of ETFs, but the issuer is limiting creation units so it could trade like a closed end fund.
>Why isn't everyone and their sister shorting the Asian market right now?
Because every seller requires a buyer.
Because every seller requires a buyer.
Very, very low liquidity for foreigners. I don't even know what the rules are for nationals. Maybe some hedge funds are doing some otc stuff but otherwise there just aren't any serious options.
I always wondered what evidence there is that a trading freeze would stabilize a market.
Considering the US market has trading halts as well, US regulators should take note: Sometimes a stock goes down because it should.
Considering the US market has trading halts as well, US regulators should take note: Sometimes a stock goes down because it should.
Trading halts are common historically in many markets in the US as well, like you said. Commodities have a history of halts, and there have been many periods where you'd have three or four days in a row of halted trading in the first minute; essentially these highly leveraged markets needed to move way, way down or up and took a while to do so with the halt system.
I don't know what commodities markets in the US do now with respect to halts, but in a world where we have retail players swimming with very sophisticated traders, I think the halts likely help more than hurt for the small players; retail brokerage users have no hope of dealing with short term spikes and may get stop-lossed out unfavorably; a halt lets them think hard and change up their stops overnight or once they see the news.
I don't know what commodities markets in the US do now with respect to halts, but in a world where we have retail players swimming with very sophisticated traders, I think the halts likely help more than hurt for the small players; retail brokerage users have no hope of dealing with short term spikes and may get stop-lossed out unfavorably; a halt lets them think hard and change up their stops overnight or once they see the news.
I think it is OK to have trading halts for particular situations. For example, a stock may be going down quickly just because of a wild rumor. Halting trade for the day may give time to investors, so they can consider what the facts are before taking a more informed decision. On the other hand, I agree with you that trade freezes are not enough to fix true underlying issues -- as it seems to be the case with China.
Even a wild rumor is a stupid reason to halt trading. If someone is dumb enough to believe it and they sell their shares at a massive discount, it's not the job of regulators to stop that.
Of course it's even worse: those halts punish the ones who do not believe, and who understand what is going on.
> I think it is OK to have trading halts for particular situations.
Sure, but that's not what I'm referring to: Anytime a stock drop by a given percentage, it is halted. Also, if the market drops by a percentage, the entire market is halted.
If those happen to be part of a larger coupled drop, then the US market would have the same problems opening that the Chinese market is having: Everyone waits for the open, tries sell all at once, re-invokes the halt, and repeat.
Sure, but that's not what I'm referring to: Anytime a stock drop by a given percentage, it is halted. Also, if the market drops by a percentage, the entire market is halted.
If those happen to be part of a larger coupled drop, then the US market would have the same problems opening that the Chinese market is having: Everyone waits for the open, tries sell all at once, re-invokes the halt, and repeat.
When a certain amount of time is needed to process new information, then halts make sense for relatively brief periods. Otherwise it's silly. Halting Pets.com in 2000 wouldnt have mattered, just like I suspect the halt in the majority of China's stocks wont either.
> When a certain amount of time is needed to process new information, then halts make sense for relatively brief periods.
Yes. I'm referring to the automatic halts after a percentage drop.
> Halting Pets.com in 2000 wouldnt have mattered,
Exactly. The trading-pause rules have been implemented since then. I'm wondering if the trading halt rules would have exacerbated the Y2K meltdown.
Yes. I'm referring to the automatic halts after a percentage drop.
> Halting Pets.com in 2000 wouldnt have mattered,
Exactly. The trading-pause rules have been implemented since then. I'm wondering if the trading halt rules would have exacerbated the Y2K meltdown.
Behavioral economic studies show that humans prefer to avoid loss more than to gain --
So it's possible that markets rationally cut losses more than they rationally add capital to undervalued stocks.
Regardless, all the "freeze" does is make the published "price" no longer reflect the market price.
So it's possible that markets rationally cut losses more than they rationally add capital to undervalued stocks.
Regardless, all the "freeze" does is make the published "price" no longer reflect the market price.
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This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets.
That and the high expense ratios.
That and the high expense ratios.
Had you bought a Chinese index share a year ago, you'd still be up around 100%...
I saw one up 13xx% in last 5 years, I would take the risk for that kind of return
But could you sell ?
Not really. The value of a thing is what someone else is willing (and able) to pay for it.
Therefore the value of a Chinese share, at the moment, is $0. In practice it's even negative, as you'll still be paying fees for your brokerage account.
Therefore the value of a Chinese share, at the moment, is $0. In practice it's even negative, as you'll still be paying fees for your brokerage account.
Chinese shares aren't trading at 0. Trading automatically halts after a certain percentage drop on the SSE, it's normal, although not for so many stocks to drop at once. Tomorrow those shares will resume trading, and it won't be at 0.
You can see the alternative on the HK market, where some stocks are 15-20% down for the day.
You can proclaim the world is ending, I'll be buying at the bottom. While the volatility is a little crazy right now, it's not the end.
You can see the alternative on the HK market, where some stocks are 15-20% down for the day.
You can proclaim the world is ending, I'll be buying at the bottom. While the volatility is a little crazy right now, it's not the end.
"...I'll be buying at the bottom."
When I went to casinos for fun I never heard anyone admit they lost money gambling. This statement reminds me of gamblers who never admit they lost. You can't predict the bottom. It is highly unlikely that you will actually buy at the bottom. You were speaking hyperbolically I know but the sentiment is a bad one to have when it comes to investing and gambling.
When I went to casinos for fun I never heard anyone admit they lost money gambling. This statement reminds me of gamblers who never admit they lost. You can't predict the bottom. It is highly unlikely that you will actually buy at the bottom. You were speaking hyperbolically I know but the sentiment is a bad one to have when it comes to investing and gambling.
No one likes to admit to losing money, you're right. Good poker players still lose hands, and good traders make bad trades. The key though, is when you lose, to cut your losses. When you win, make them count.
I certain didn't predict this drop. Then again, I was out of HK last month. I traded in Europe for the last few weeks. I lost money this week, underestimating the effect of Greece.
But one thing I do know, is that this drop is a buying opportunity. And you're right, I can't predict the bottom. But I can choose an oversold stock I know will rebound, buy it when it's down to a major support level, and hope for the best. And I've done alright with my strategy. I make a fairly decent return and can sleep at night.
And I do like hyperbole :-)
I certain didn't predict this drop. Then again, I was out of HK last month. I traded in Europe for the last few weeks. I lost money this week, underestimating the effect of Greece.
But one thing I do know, is that this drop is a buying opportunity. And you're right, I can't predict the bottom. But I can choose an oversold stock I know will rebound, buy it when it's down to a major support level, and hope for the best. And I've done alright with my strategy. I make a fairly decent return and can sleep at night.
And I do like hyperbole :-)
The stock market is inherently different than going to the casino. Buying at the bottom is hardly a bad sentiment to have when it comes to investing, especially when it comes to making swing trades in thoroughly researched businesses.
>Buying at the bottom is hardly a bad sentiment to have when it comes to investing,
Buying at the bottom is sheer genius. Being able to actually do it in practice, however, is another story, despite how much you've "researched businesses".
Buying at the bottom is sheer genius. Being able to actually do it in practice, however, is another story, despite how much you've "researched businesses".
If your stock is worth $0, then can I buy it from you for $1?
If you hold stock on a stock exchange that closes down every night, is your holding worth $0 overnight while it's untradable?
If you invest in a startup where you're not allowed to liquidate for 5 years, and then it eventually sells for millions, was it worth $0 for the entirety of those first 5 years?
If your exchange only allows you to trade once every 16th of a second, is your position worth $0 during those 16th of a second gaps?
If you hold stock on a stock exchange that closes down every night, is your holding worth $0 overnight while it's untradable?
If you invest in a startup where you're not allowed to liquidate for 5 years, and then it eventually sells for millions, was it worth $0 for the entirety of those first 5 years?
If your exchange only allows you to trade once every 16th of a second, is your position worth $0 during those 16th of a second gaps?
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This is a fairly broad and inaccurate statement: emerging markets are way beyond China.
If you follow the booming countries until/if they burst you will make more money in that time frame.
If you follow the booming countries until/if they burst you will make more money in that time frame.
>This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets.
FXI, even after falling off a cliff, is returning 11% YTD, vs 1% YTD for the SPY. It has an expense ratio of 0.74%.
FXI, even after falling off a cliff, is returning 11% YTD, vs 1% YTD for the SPY. It has an expense ratio of 0.74%.
The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental."
Ouch. Stock prices follow fundamentals, if at all, only in the longest terms.
Ouch. Stock prices follow fundamentals, if at all, only in the longest terms.
so what's gonna happen tomorrow?
Either another drop, or maybe a rebound? My money's on a drop, the SSE is only now crossing the 150 day moving average. But it won't last too much longer. I'd start freeing up some money to buy shares, but be very cautious for the immediate future.
what makes you think it will rebound?
btw, god damn, we need a HN for traders.
btw, god damn, we need a HN for traders.
You already have Yahoo message boards. And it's crappy, but I suspect it's at least 50 percent not Yahoo's fault.
I don't think it'll rebound tomorrow, but it will eventually (next week?). The fundamentals are all the same, the valuations just got too high. Right now its just panic selling. Most of the stocks I'm following are still higher than I bought them for initially.
what makes you believe this is a panic selling? not trying to put you on the spotlight, genuinely curious to hear all sides
Just the fact that nothing has changed fundamentally. The companies are more or less the same as a month ago.
Must disagree. The companies asset values are in decline. Raw materials, machinery, real estate... All down. A bounce in bids cannot change the underlying reality.
A decrease in the cost of inputs is good for businesses. China will be fine.
aren't the cost of input the lowest in the world already in china ? Why they go down if so ?
My timing was off a little but, it's rebounding. I got in on a great trade in a Hong Kong listed stock (BYD - 1211.HK) - not at the perfect time (missed the bottom), but a good enough time to be up 20% right now.
The China indices (Shanghai and Shenzhen) are up over 10% in the last 2 sessions as well.
The China indices (Shanghai and Shenzhen) are up over 10% in the last 2 sessions as well.
Get in when the market P/E is 1 or 2, and dividend yield is extraordinary high, and market capitalisations are less than current cash holdings. (I've actually done that and so far my money in that company doubled.)
seeking alpha?
Traders use Bloomberg.
Looks like a big move is going to happen in US markets judging by afterhours being very in the red
It won't be contained in China, that of we can be sure of in todays global economy. If things will continue in the same direction we can expect at least a mild recession in China. That will have a large knock-off effect on the world economy. Slower growth in China will result in a slower growth everywhere else.
>If things will continue in the same direction we can expect at least a mild recession in China.
A recession? China's GDP grew over 7% last year. You think it's going negative because a stock bubble is retracing some of it's ludicrous gains?
A recession? China's GDP grew over 7% last year. You think it's going negative because a stock bubble is retracing some of it's ludicrous gains?
The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.
The rumors in China about malevolent foreign influence on the market also echo the 1929 crash. Galbraith again:
What was perhaps the last word on the policy of reassurance was said by Simeon D. Fess, the Chairman of the Republican National Committee: "Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops."
[1] http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/...