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Chinese Stocks Up 41% Since Unleashing QE As Margin-Trading Doubles

Tyler Durden's picture




 

A funny thing happened in China in July. Ever so quietly, and with little aplomb, the PBOC unleashed CNY 1 trillion of 'Pledged Supplementary Lending' (PSL) to China Development Bank - later dubbed "QE-Lite." Economic indicators temporarily blipped higher, a new recovery was proclaimed by the masses, and the world fell back into its stupor... despite the post-credit-impulse hangover which has seen Chinese data collapse in the last 2 months. But that did not stop speculators... tired of betting on Chinese real estate (which never goes down), the 'signal' of QE has sparked a stunning 41% surge in Chinese stocks since PSL (and boosted by the recent rate cut). However, this exuberant resurgence (+4.3% last night alone) rests on shaky foundations as margin trading balances have more than doubled during this period...

 

Probably just coincidence, right?

Charts: Bloomberg

As The Wall Street Journal notes,

Desperately low valuations for China’s biggest companies, especially its banks and property developers, may have helped, but hardly explains the sudden jump. These sectors have been cheap for years. Lower oil prices help at the margins for China’s big industrial companies. And the opening of the Shanghai-Hong Kong Stock connect, while failing to meet expectations, has added a new source of fuel.

 

A bigger factor may be a great rotation among retail investors who make up the bulk of mainland traders. Stocks have been moribund since rising to bubble levels and then crashing in 2007. Households turned instead to property and high-yielding shadow banking products. Both of those have now lost favor. Property prices are falling, while wealth management products are being squeezed by regulators, and in a few cases failing to pay back in time or in full.

 

Declining interest rates in the market for interbank funds further reduces returns on savings.

But the steepness of the rally should have investors on edge.

While authorities have certainly moved to a more pro-stimulus stance, the chances for an all-out easing campaign aren't assured. Many within the government remain resolute that credit-fueled growth must be curbed. And property woes, while ebbing somewhat, are far from solved.

 

Leverage has proved a potent accelerant. Margin trading in Shanghai and Shenzhen has doubled since July to 800 billion yuan ($130 billion), notes Chen Long at GaveKal Dragonomics.

*  *  *
Nothing to see here, move along...

 

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Thu, 12/04/2014 - 11:54 | 5516654 youngman
youngman's picture

The Chinese love to gamble....LOVE IT

Thu, 12/04/2014 - 11:56 | 5516669 Cognitive Dissonance
Cognitive Dissonance's picture

It ain't gambling if it's a sure bet. /sarc

Thu, 12/04/2014 - 11:58 | 5516683 Publicus
Publicus's picture

The Chinese economy is booming now that oil is cheap again.

Thu, 12/04/2014 - 13:03 | 5516971 Latina Lover
Latina Lover's picture

Buying chinese stocks is like eating chinese food, half hour later, you are hungry for more.

Thu, 12/04/2014 - 13:24 | 5517055 KnuckleDragger-X
KnuckleDragger-X's picture

It's amazing but I think the Chinese market is actually out fucking up the American market. It must be nice to have a full autocracy instead of a partial one.

Thu, 12/04/2014 - 11:53 | 5516658 venturen
venturen's picture

It is all Good....Jon Gruber!

Thu, 12/04/2014 - 11:56 | 5516673 LawsofPhysics
LawsofPhysics's picture

Zimbabwe market!!!

 

Wheeee....!!!

Thu, 12/04/2014 - 12:01 | 5516691 Tsar Pointless
Tsar Pointless's picture

What goes up...must go upper!

Thu, 12/04/2014 - 12:03 | 5516711 trulz4lulz
trulz4lulz's picture

The Amerikan Fed model of success! Hoooorah!

Thu, 12/04/2014 - 13:25 | 5517058 KnuckleDragger-X
KnuckleDragger-X's picture

Yellen is taking notes....

Thu, 12/04/2014 - 12:00 | 5516692 yrbmegr
yrbmegr's picture

No posts about US decline this morning?  ZH, your anti-US heat is waning.

Thu, 12/04/2014 - 12:28 | 5516802 FuzzyDunlop21
FuzzyDunlop21's picture

Well the Euro close and 330pm ramp should set us at about +0.5%

Thu, 12/04/2014 - 14:33 | 5517333 Ying-Yang
Ying-Yang's picture

Are you refering to...

It’s official: America is now No. 2

Hang on to your hats, America.

And throw away that big, fat styrofoam finger while you’re about it.

There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.

It just happened — and almost nobody noticed.

http://www.marketwatch.com/story/its-official-america-is-now-no-2-2014-1...

Thu, 12/04/2014 - 12:37 | 5516808 Ewtman
Ewtman's picture

"But the steepness of the rally should have investors on edge."

Yes it should... the Shanghai Composite chart above is a perfect example of a bubble. Everything about it says a huge crash is just around the corner...

http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...

 

 

Thu, 12/04/2014 - 12:37 | 5516829 adr
adr's picture

The Chinese are starting to drink the tribal cool-aid that the path to wealth leads straight to the stock market.

You forgot one big catalyst, Jack Ma. Most chinese hate him and think he looks like a creature that crawled out from under a rock. They call him gollum. 

But, because of the stock market he became China's richest man overnight. He didn't build mega cities. Didn't build factories. Just sold fake shares on a stock exchange.

 Wealth without work. What the tribesman sells you on. What he doesn't tell tou it is his wealth you create without effort.

Thu, 12/04/2014 - 12:52 | 5516918 orangegeek
orangegeek's picture

these communists fucks are going accomplish in 10 years what it took Japan 30 years to do

 

 

Thu, 12/04/2014 - 12:56 | 5516940 bid the soldier...
bid the soldiers shoot's picture

Confucius say 

the steepness of the rally should have investors on edge.

LOUIS  "I'm shocked, shocked to learn there's no edginess going on here."

RICK     "Louis, I think this is the beginning of a beautiful Ponzi scheme."

LOUIS   "Round up the usual suspects"

RICK      "Want some dim sum?"

Thu, 12/04/2014 - 13:04 | 5516983 chinaboy
chinaboy's picture

A contra indicator of the real economy.

Thu, 12/04/2014 - 13:42 | 5517118 theyjustcantstop
theyjustcantstop's picture

the chinese said we can play your game, huge financial headlines china enacts qe program, then stand back, and watch the investors come to the light.

there, match that dudley.

 

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