Tag Archive for China stock market

China stock drop // So Large That Losses Eclipsed BRICS Peers, Twice

From Bloomberg, Aug 26, 2015

Take the combined size of all stocks traded in Brazil, Russia, India and South Africa, multiply by two, and you’ll get a sense of how much China’s market value has slumped since the meltdown started.

Bloomberg calculates that China alone has accounted for 41 percent of equity declines worldwide since mid-June.

The scale of China’s stock market drop also exceeds the entire size of the Japanese stock market.

What will be the size of its commercial business drop, given such a large scale loss of investor confidence?

in the same period we already see Brazil hit by a recession as calculated by two successive quarters of slower growth and a negative year over year second quarter economic growth of about 2.5%.

How is this all affecting your strategic planning?

To read the entire article, go to http://bloom.bg/1UdNCpu

Among the companies China’s Rescue Fund Is Buying to End the Stocks Rout

From Bloomberg, Aug 9, 2015

China Securities Finance Corp. has quickly become one of the most influential investors in the Chinese stock market, with $483 billion of firepower and the potential to add $322 billion

Here’s a look at some of the biggest CSF positions tracked by Bloomberg, all of which the agency has initiated or increased since June 30

They include rail

1) China Railway Group Ltd. * CSF’s holding: 10.4 billion yuan ($1.7 billion)

* Company description: One of China’s largest railway construction contractors

* Return since June 30: -2.1%

* Price-to-earnings ratio: 28

* Market capitalization: 275.1 billion yuan

2) China Railway Construction Corp. * CSF’s holding: 9.1 billion yuan

* Company description: Railway construction contractor

* Return since June 30: 7.2%

* Price-to-earnings ratio: 18

* Market capitalization: 211.7 billion yuan

To read the entire article, go to http://bloom.bg/1PeQ4e

Is China stock market intervention a loss of confidence?

From Bloomberg, Jul 8, 2015, 6:56 pm

Templeton Emerging Markets Group calls it an act of “desperation.” UBS Wealth Management labels it “extreme.” And Wells Fargo Funds Management says it just “postpones the inevitable.” What do you think?

Regardless, the drop in value marks a significant economic “hurt” for China. And a signal of tough times for those nations that depend on China for trade.

Are we paying attention? What is the strategic plan now? For all of us.

The old plans are trash.

To read the entire article, go to http://bloom.bg/1J5dUUQ

Excerpts include: “The (reported) measure can be effective in the short term because you are not going to allow people to trade,” said Jorge Mariscal.

As the record-breaking boom goes bust, President Xi Jinping is intervening in an attempt to prevent the rout from eroding confidence in his leadership. The moves have cast doubt on the Communist Party’s pledge less than two years ago to give market forces a bigger role in the economy, which is part of its largest reform drive since the 1990s.

China isn’t the only market with a history of state intervention. During the 1998 Asian financial crisis, Hong Kong bought shares worth $15 billion to prop up the market. In the U.S., the Securities and Exchange Commission temporarily banned short selling on some shares during the global financial crisis in 2008.

WHAT HAPPENS NEXT?

Supporting the droping stock market is going to put a crimp in the Chinese government plans to finance infrastructure in emerging nations.

Greece gets 7 July headlines, but the real economic story is in China

Greece gets all the financial headlines while the real economic story may be in China.

The Bloomberg report tonight Jul 7, 2015 points out that Chinese shares lost to negative territory on Tuesday. The benchmark Shanghai Composite Index was down finished at 3,727.13 points. The Shenzhen Component Index slumped 5.8 percent to close at 11,375.6 points. (Xinhua/Pan Yulong)

A wave of 1,249 Chinese companies halted trading in their shares.  That is estimated at over 40% of those listed.

Also, CHINESE regulators unveiled new measures to prop up the value of small-cap stocks in the latest attempts to stem a rout that’s wiped more than $3.5 trillion of value.

To read the entire article, go to http://bloom.bg/1Tk4PyJ

China stock market drop hits young inexperienced middle class the hardest

As one of my friends who travels to China a lot has warned, the stock market often appears like a wild casino game. With very little education about market risks, the current drop in value is hurting the middle class and young investors very hard.

What is the long term impact to China’s growth strategy?

As the BBC reports tonight, in China, unlike in the European or US markets, individuals make up around 80% of the stock market investors. Many of them are new and inexperienced, often following whim and rumour to make decisions. This can lead to “herd behavior”.

China  a leaders had been seeing a buoyant stock market as a key part of its strategic shift to a consumer society with rapidly increasing share ownership.

Now they need a Plan B.

See BBC full story on 7 July 2015.

Untameable China stock market | The Economist report two days ago on trends

The recent Chinese stock market mini-crash has underlined the fundamental role of debt in Chinese share-trading.

The Economist reported that Goldman Sachs reckons outstanding margin financing, at 2.2 trillion yuan ($355 billion) earlier last week, was the equivalent of 12% of the value of all freely traded shares on the market, or 3.5% of China’s GDP.

Both “are easily the highest in the history of global equity markets,” its analysts noted.

With Chinese shadow banks and peer-to-peer lenders also offering cash to investors, the amount of hidden leverage in the market is estimated to be as much as 50% higher. That debt helped fuel the initial stock rally. It is now adding to the pain, as leveraged investors rush to sell their holdings to cover their debts.

The Economist argues the case as to long term impacts on further China economic development as this market confidence struggle plays out.

Go to: http://www.economist.com/news/business-and-finance/21656867-bad-week-chinas-stockmarkets-could-be-felt-years-untameable-market

Also see the BBC for second source economic reports on this China story.

Cheers!

 

 

 

 

Alarming Monday economic stock market news out of China on 6 July 2015

The Greek Sunday austerity vote may be “peanuts” compared to the market news impact out of China.

There is an Interesting graphic comparison by Bloomberg between the historical changes in Wall Street during 1929 and China in 2015. (see the Bloomberg graphic)

Perhaps the Chinese government may be more successful in intervening today then was the limited private game plan during 1929.

Clearly, there does appear to be a significant confidence sell off in today’s market. The parallels look interesting but need to be tested by time in the year to come before we will know. Here are some interesting statistics. The two graphic stock price trends are separated by 86 years and 7,300 miles, but Chinese financiers are turning to the same playbook according to Bloomberg that were used by their American counterparts to fight a crash that’s wiping out stock-market fortunes on an unprecedented scale.

Investors in China are hoping it works out a lot better this time around.

IN 1929|

“When five of America’s most-powerful financiers met at the House of Morgan at 23 Wall Street on Oct. 24, 1929, the immediate impact of their plan to pool resources and prop up the market was encouraging: the panic of Black Thursday gave way to a recovery and the New York Times lauded the bankers for putting a floor under share prices.” “The boost to confidence didn’t last long. The 1929 price rout resumed by the following Monday, with the Dow Jones Industrial Average losing 13 percent.

The gauge would go on to drop another 34 percent over the next three weeks, as the attached chart shows.”

IN 2015

How long will the recent support measures in China last?  The measures might have a fleeting impact according to Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. A group of 21 Chinese brokerages pledged on Saturday to commit 120 billion yuan ($19.3 billion) to a large-cap stock fund, designed to stabilize shares.

This action plan comes on the heels of a three-week rout in the Shanghai Composite Index — the biggest drop since 1992. The brokerage move coincides with a “flurry of other market-boosting measures including a halt to initial public offerings and regulatory moves to discourage short sellers.

 

IPOs Suspended in China as another intervention game plan

Over the weekend, the China government suspended initial public offerings and the central bank said it would provide liquidity for margin trading.

Stemming the loss pattern? These actions come after the Shanghai Composite has tumbled 29 percent in the past three weeks.

That has already erased a whopping $3.2 trillion of value. Yes, TRILLIONS.

A major concern is that “leveraged traders may be liquidating their previous equity bets”.

“Excluding banks, the Shanghai Composite Index was trading at about 31 times trailing earnings.”

On Wall Street in 1929, it was the great banking houses of J.P. Morgan and Guaranty Trust Company that tried to stem the economic tidal wave.

To read the entire article, go to http://bloom.bg/1fe0PSb

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As you have your Monday morning coffee…

Early July 6th and late July 5th news reports indicate that the Hong Kong Exchanges & Clearing Ltd. Had dropped a noticeable 12 percent as of about 1:30 p.m. That would be its biggest decline since October 2008.

A Double Dip recession? Probably.

The Bloomberg Commodity Index fell as much as 1.8 percent to 100.0574, — the biggest intraday loss since May 26th. This gauge is down 4.1 percent this year in tracking declines of base metals and crops.

The MSCI Emerging Markets Index lost 2.5 percent to 940.52 at 1:35 p.m. in Hong Kong. That has wiping out this year’s 2015 advance.

South Korean shares appeared to be headed for the steepest loss since 2012.

Trading houses like Goldman Sachs Group, JPMorgan, Chase & Co. and Bank of America Corp. appear from news reports to have advised their clients to sell shares on the China perceived rallies.

Most reporting in the USA media seems meanwhile to be focuses on the Greece austerity referendum vote rather than these economic events in China.

Clearly, global resource driven railway projects from Mongolia to South Africa and Senegal to Brazil are now even more threatened as to economic feasibility.

Rail Planners may now need to develop Plan C and drop their earlier small Plan B changes as the global economy undergoes another series of “economic body blows”.

It is possible that the market in China may stabilize. But the trend and economic cycles of history are a cause for investor concern. Markets react poorly to circumstances shown in the above reports.

The six year global struggle to come out of the 2007/2008 recession is clearly not yet over. A further three to six year recovery period may be the pattern out towards 2021. Events and data in the coming six to twelve months should tell us all more.

IS ANYONE PAYING ATTENTION as Chinese Stocks drop these past 3 weeks?

July 2, 2015

Everyone seems fixated about Greece’s future in the euro zone.

Pat the same time, overlooking the economic consequences of a stock market slump on the other side of the world.  CHINESE equities have dropped more than 20% — yet it is causing barely a ripple in global markets!

To read the entire article, go to http://bloom.bg/1em9W1S

China has seen a a 3-week plunge in Chinese equities. Some calculate a massive $2.4 Trillion loss in China market value.  That is calculated as the equivalent of about 10 times Greece’s gross domestic product last year.

How much longer must Chinese stocks continue dropping at this steep pace before the economic shock fears shift away from Greece?

Which economic indicator means more to emerging nation resources and transport infrastructure plans?  Hands down, it would probably be the China drop.

Will Chinese equities recover? Will China’s government step in with a recovery program?

If a bubble burst, how will the global economies react to a China crisis versus all of the attention on Greece?

What is your opinion? Jim