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China Is Turmoiling

Tyler Durden's picture




 

For the 2nd time in a month, China's Shanghai Composite entered a correction, plunging 10% from local highs as headlines of delayed IPOs and large-scale steel 'dumping' at a loss combined with global monetary policy fireworks and European event risks. The rest of the more highly sensitive and manic Chinese equity markets are also plunging with CHINEXT and CSI-300 down over 7% in the last month (and 17% from the highs in the case of the former).

 

Chinese stocks have gone nowhere in a month...

 

Before you read on - STOP and look at the volatility we are talking about here... multiple 10 to 15% swings in major stock indices in the last month. Compare that to the US market's idiocy where we have seen no vol whatsoever in the last six months.

 

Of course - as US equities roared to record highs today in the face of the most serious Grexit fears yet and a Fed that just admitted the economy is FUBAR - Chinese stocks are for once derisking responsibly (for now).

But there are more troubles in big China as Reuters reports China steel exporters are dumping inventories at a a loss...

Some Chinese steelmakers are selling their output abroad at a loss, according to traders and a producer, as a group of global industry bodies urged governments to take action over rising shipments from China.

 

Chinese mills had sold steel overseas at a loss of up to 200 yuan ($32) a tonne and cut the export price of hot-rolled coil by 5 percent to $340-$350 a tonne, free-on-board basis, this week compared to last week, according to traders and a producer in Hebei, China's top steel producing province.

 

These mills were also selling at a loss to the domestic market, they said.

 

"The domestic market is too weak to consume high output and our prices are competitive, so some mills are still keen to step up exports, hoping to ease high inventories and maintain market share," said a senior official at a privately owned mill in Hebei.

 

China exports around 10 percent of its annual steel output from hundreds of steelmakers and it was unclear the quantity of steel the traders and official were referring to.

 

China's steel exports rose 28 percent to 43.5 million tonnes in January-May, even as domestic crude steel output fell nearly 2 percent. In 2014, exports jumped 51 percent to a record 93.78 million tonnes.

 

Eight steel associations from Asia, the Americas and Europe said in a joint statement this week all regions were "suffering from a dramatic increase in unfair steel imports that is fueled by massive global overcapacity."

 

"Looming over it all is China, whose massive and increasing overcapacity in an era of slowing growth has already destabilized the global steel market and trade flows," the statement said.

Two words - malinvestment and over-capacity - sum up the entire farcical surge in China, and as George Soros warned, if the reforms Xi is pushing fail, his best last solution will be war to keep a nation united and working for a common 'good'.

*  *  *

Another IPO delayed:

  • *BANK OF JINZHOU IPO DELAY AS REGULATOR ASKS FOR INFORMATION
  • *BANK OF JINZHOU HOPES TO RESCHEDULE H.K. IPO HEARING TO JULY
  • *BANK OF JINZHOU SAID TO DELAY IPO ON LINKS TO HANERGY: REUTERS

And a bond sales canceled:

  • *DRAGON CITY TOURISM CANCELS BOND SALE DUE TO MKT VOLATILITY

*  *  *

Which just adds to the IPO pain we noted earlier...

 

 

But it's a "no brainer" remember...

 

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Thu, 06/18/2015 - 23:11 | 6212587 nosam
nosam's picture

Typically, before a crash, you get a period of wild swings.

Thu, 06/18/2015 - 23:24 | 6212643 fascismlover
fascismlover's picture

So that means long Nasdaq then?  (I'm guessing yes until it is a very loud no). 

Fri, 06/19/2015 - 00:32 | 6212793 TruthInSunshine
TruthInSunshine's picture

China's economy, equity "markets," bond markets, real estate (residential, in particular), and other parts pertinent to are in a manic, detached-from-reality, epic bubble that represents a once in a 100 year event, and China's implosion will be the spark that sets the global economy into full-on meltdown mode THIS YEAR, with Japan, Korea, Australia, the Asian Tiger economies, Canada and Germany being most adversely impacted.

Fri, 06/19/2015 - 01:22 | 6212858 walküre
walküre's picture

Yes. There will be bargains. Is a mix of cash and precious the best strategy to buy for pennies on the Dollar?

Fri, 06/19/2015 - 02:30 | 6212953 the kings whore
the kings whore's picture

China is filled with steers and queers.  That place is going nowhere fast.  Who would listen to those clowns?

Fri, 06/19/2015 - 02:20 | 6212933 Laowei Gweilo
Laowei Gweilo's picture

no

pboc has far too many tools left to allow what you're describing to happen so suddenly, even in 2-3 years, let alone this year.

it may happen but it'll be drawn out by plentiful pboc policy that is still relatively untapped by european and american standards.

 

Fri, 06/19/2015 - 10:47 | 6213889 brodix
brodix's picture

More speed doesn't work when the wheels are coming off. 

Fri, 06/19/2015 - 02:34 | 6212958 hedgiex
hedgiex's picture

Yes. The last Asian Financial Crisis is a picnic for the Asian Tiger Economies. Foreign Investors will be hurt by the Crony Capitalists (in all shapes) there.

If still risk off,,,still better juices now elsewhere.

Thu, 06/18/2015 - 23:13 | 6212593 Soul Glow
Soul Glow's picture

It's getting tossed aound like a Shanghai hooker.

Thu, 06/18/2015 - 23:51 | 6212722 lolmao500
lolmao500's picture

More like a Shanghai hooker salad

Fri, 06/19/2015 - 01:11 | 6212847 divingengineer
divingengineer's picture

Pics please.

Thu, 06/18/2015 - 23:15 | 6212601 q99x2
q99x2's picture

And if the war is against George Soros and the central banks I want' to know where to sign up.

Thu, 06/18/2015 - 23:15 | 6212603 NoDebt
NoDebt's picture

In retrospect, combining Communism with Crony Capitalism and western-style infinitely-leveraged monetary policy might have been a bad idea.

I'm talking about the United States.  China's even worse.

 

 

Fri, 06/19/2015 - 01:12 | 6212848 divingengineer
divingengineer's picture

You pick the most fucked up elements from all the paradigms and hybridize a real muffugga of a system.

Thu, 06/18/2015 - 23:16 | 6212606 One And Only
One And Only's picture

When did US QE end?

Thu, 06/18/2015 - 23:26 | 6212647 Soul Glow
Soul Glow's picture

Any day now.  The Fed promises.

:)

Fri, 06/19/2015 - 01:13 | 6212849 divingengineer
divingengineer's picture

It ended?!

Thu, 06/18/2015 - 23:32 | 6212616 RogerMud
RogerMud's picture

<sarc>

Yellen has everything firmly in hand, risk has been banished from US market

</sarc>

Thu, 06/18/2015 - 23:22 | 6212632 NeverForgetSilver
NeverForgetSilver's picture

If Chinese stocks goes up, it is a bubble. Bad. If Chinese stock goes down, it is a crash. Worse. What should it do? How much more biased can you be?

Thu, 06/18/2015 - 23:24 | 6212638 Soul Glow
Soul Glow's picture

Well I am sure the PBoC is being as honest as the Fed with their accountabilty and whatnot.

Fri, 06/19/2015 - 01:16 | 6212853 divingengineer
divingengineer's picture

Who the fuck said there is a clean and easy way out?

You put your money on black-26 and miss, it aint my fault.

Fri, 06/19/2015 - 01:39 | 6212880 umdesch4
umdesch4's picture

das rayciss

Fri, 06/19/2015 - 03:26 | 6213009 Midas
Midas's picture

Red privilege.

Thu, 06/18/2015 - 23:27 | 6212652 heisenberg991
heisenberg991's picture

War with the USA could pump up the steel prices. The first target will be Detroit.

Thu, 06/18/2015 - 23:31 | 6212664 Aussiekiwi
Aussiekiwi's picture

You can print steel, right?....or am I thinking of print steal.

Thu, 06/18/2015 - 23:43 | 6212702 holdbuysell
holdbuysell's picture

"Before you read on - STOP and look at the volatility we are talking about here... multiple 10 to 15% swings in major stock indices in the last month. Compare that to the US market's idiocy where we have seen no vol whatsoever in the last six months."

Sweet. Tyler just tipped off Chinese housewives everywhere on where to 'safely' gamble next.

May Schwab have enough account numbers to accommodate the onslaught.

 

Fri, 06/19/2015 - 00:17 | 6212772 OhNo
OhNo's picture

I hope my gold coins can buy some cheap chinese slaves.

Fri, 06/19/2015 - 00:57 | 6212830 TruthInSunshine
TruthInSunshine's picture

As it has been, it shall be; Chinese factory owners are already uprooting their facilities & moving machinery to Vietnam, Thailand, etc., in order to
shave 25% to 50% in labor costs as they struggle to squeeze any & every excess penny of cost from their operations.

Fri, 06/19/2015 - 03:10 | 6213000 laomei
laomei's picture

the major difference here is that the chinese factory owners are the ones doing it.  they are the ones opening the new factories and controlling them.  in the end, the profits still flow back to china.  when the us did this, they just outsourced.  dumping the manufacturing aspect entirely and focusing on the IP and marketing.

 

china's not going to be outsourcing shit to 3rd parties, ain't gonna happen.  why give up that aspect when you don't have to?

Fri, 06/19/2015 - 04:54 | 6213066 Dindu Nuffins
Dindu Nuffins's picture

They'll be undercut by local  companies in those other countries. First the small-cap factories that are easy to start up and produce trinkets, then gradually mid-cap, then....

No foreign company can compete with local ownership in the long run, when red tape cuts into profits and cultural differences make the organisation less responsive. What you berate western companies for doing is the natural progression.  

Fri, 06/19/2015 - 01:13 | 6212851 laomei
laomei's picture

the problem with this article is that it assumes chinese markets function the same way that they do in the west, primarily the us.  the chinese market has ALWAYS been volatile.  The market cap might be growing, but it's still not really all that much, and it still has not even come close to previous highs.  There is a LONG WAYS to go still in this bubble before it pops or shifts or deflates or whatever.

Fri, 06/19/2015 - 01:44 | 6212886 TruthInSunshine
TruthInSunshine's picture

You've been in opium den way too long.

Look up investopedia definition of "bubble" and there's a map of 2015 China there.

Fri, 06/19/2015 - 03:04 | 6212990 laomei
laomei's picture

the problem with that mentality is that sometimes a bubble is not as much of a bubble as you think.

since 2001 expats were claiming that housing was a bubble and warned against buying it.

In 2002, 03 04 05 06 07 08 09 10 11 12 13 14 and 15 all crying the same thing.

 

Well, I bought in 02 and again in 06.  I am up by so many multiples that a drop of 50% would mean nothing to me.  Those expats who refused to buy in, well, the few that are still in China, no longer live in their large apartments in the city, they live pretty far from the center now in smaller places that are increasingly expensive.

 

the market being a bubble, sure, to a degree it is, and it will see a correction to a degree as well.  however you have to look at how much more it can be blown up before it pops.  China is not all that financialized at all.  Pensions and retirements are not linked to the stock market.  Buying stocks is not a primary investment strategy for most either.  There is ~100 trillion RMB sitting in regular bank accounts, uninvested, gathering 0.35% interest and being ignored.  Put that in play... leverage it... see what happens.  With all that new market cap, the companies would be obligated to use those funds to expand.  If not in China, then by buying out foreign companies.  At a time that the rest of the world is imploding and having run out of tricks... China is just getting started...

Fri, 06/19/2015 - 04:18 | 6213043 Dindu Nuffins
Dindu Nuffins's picture

Aren't baigui limited to owning one house?

Fri, 06/19/2015 - 08:42 | 6213405 laomei
laomei's picture

not if you do it right

Fri, 06/19/2015 - 01:22 | 6212859 walküre
walküre's picture

Buy the phukin deep!

Fri, 06/19/2015 - 01:33 | 6212872 Bunga Bunga
Bunga Bunga's picture

Leveraged housewife will come back to wok.

Fri, 06/19/2015 - 02:27 | 6212949 scatha
scatha's picture

Those Chinese, they even stole our know-how to fuck up the nation. Blowing one bubble to save another bubble and few apparatchiks. Just when catastrophic real estate investments seems to pick up, a crash.

The stock market under ridiculous leverage, for last few years was financing the massive real estate losses now itself is collapsing as we speak.China failed to deliver on her promise to blow the bobble for a long time for 10 trillion bucks.

For those who still believe that China is ruled by communists that should be wake up call.

For last at least two decades China behaves of fascist state in every meaning of the word. Working people and any organizations that would truly protect health or any interests of workers are being destroyed. They benefit nothing from the whole western instigated and financed, by robbing western middle class, economic boom of China.

Before Chinese worker was making a dollar a month and paid one cent for bread. Now Chinese worker was making 100 dollars a month and pay one dollar for bread calling that improvement.

Remaining true communists are killed, in prisons or gagged. What we have is fascist state of fused state and private profit/public loss corporations and government via rampant cronyism with intimate ties to the western elites, themselves cultivating fascism, global fascism.

China is distinct part but nevertheless, a part of global political system run by world elites through central banking, united in quest form debauchery, gluttony, and psychotic drive to ultimate extermination of ordinary people.

The multiple decisions of China to follow western prescription only to maintain illusion of functioning world economy with ghost cities, millions un-bought cars hidden from view, fake exports to HK, collapse of energy demand and general consumption, ecological catastrophe and wide spread of poverty in China and elsewhere are clear evidences of harmony at top echelons of global elite, despite often personality conflicts misconstrued as political antagonisms.

Now China’s central bank, PBOC, years after imposing politically motivated stimulus spending, to enable recent transition of power between two political mafias, embarked on a version of massive QE on the way to ZIRP to keep badly collapsed or deteriorated “good things” going joining US, Europe and Japan on the road to collapse of society.

China’s AIIB is clear example of China’s entering a path following the US imperial path after WWI and WWII to grow sagging economy by exploiting the world (global investment strategy and dedollarization) , in attempt to bring stability to their society that no longer can be exploited with satisfactory ROI without serious political consequences. 

In other words, these are evidences that China began to depart from their Confucian historical perspective toward short-term political game. The greed of China’s ruling elites is sowing their demise as much as American ruling elite.

 

Fri, 06/19/2015 - 04:25 | 6213048 cys
cys's picture

The Chinese were behind the bitcoin runup to 1000 $. Now they are running up their own exchanges. It will crash.

Fri, 06/19/2015 - 04:31 | 6213054 Itshappening
Itshappening's picture

Anyone else think the Ching Chang stock markets are crashing is because of Grexit fears?

Fri, 06/19/2015 - 06:07 | 6213120 gmak
gmak's picture

no.

Fri, 06/19/2015 - 05:14 | 6213078 Arthur Schopenhauer
Arthur Schopenhauer's picture

China is intentionally excluded from this TPP deal. Is all this bruhaha because of this? Is this the same thing we did to promulgate the collapse of the Soviet Union back in the 80's? Perhaps the Trans Pacific Partnership is essentially an economic weapon, directed squarely at China. Maybe this TPP is not such a bad deal for America. I dunno...

Fri, 06/19/2015 - 06:01 | 6213117 Dindu Nuffins
Dindu Nuffins's picture

It's actually quite good. the Chinese wumao in particular have been out in force astroturfing this issue, so yeah, china hates it for a reason. 

Thoose jobs are never coming back. Steve was right. But they don't all have to be in China. Many other countries can spread the wealth.

If you love what's happened since China got a bit of wealth and confidence, the sabre-rattling and the mercantilism, then you'll hate the TPP. Otherwise, it's basically realising that those jobs are already gone and not coming back, but we can do business with many countries that aren't expansionist and mercantilistic. 

Fri, 06/19/2015 - 06:15 | 6213130 JustUsChickensHere
JustUsChickensHere's picture

"Maybe this TPP is not such a bad deal for the 1%"

 

FIFY

Fri, 06/19/2015 - 06:34 | 6213123 Element
Element's picture

 

 

Epic Beijing backfire.

The Chinese were offered $60 a ton iron in 2009, but they refused it and demanded (from Canberra!) $35/ton instead, and could not get it, so they threw Rio Tinto's chief annual iron ore contract price negotiator, Stern Hu, into a Chinese prison, on ad-hoc trumped-up corruption charges, because he had simply said no and flat-out refused to give Beijing $35/ton! i.e. BHP and Rio would be supplying iron ore China at an economic LOSS!

The market-economics noobs in Beijing had simply tried and actually expected to be able to extend and force the false economics of Beijings state-industries and their loss-making on to Australia's biggest mining corporations!

hahaha!

So the end result of that epic stupidity was the cancellation of contracts and a now floating iron ore price, while China's steel industry just a couple of years later was stockpiling iron ore at $160/ton, instead of the constant and stable $60 to $70 per ton China (and everyone else in Asia) could have had, all along!

A level at which no over-production and over-supply bubble and resulting economic dislocation would have ever occurred!

hahaha!

Here endeth the lesson ... except it isn't even halfway over.

 

And yes, Stern Hu is still in a Chinese Prison ... on trumped-up corruption charges ... and no, we didn't forget what you did to him, indeed, what you're still doing to him ... on thoroughly trumped-up State charges.

 

Thuggery and crime do not work.

Fri, 06/19/2015 - 06:47 | 6213158 Bearwagon
Bearwagon's picture

Thuggery and crime do work - but only for a time, not for all times ....
Let's remember: It ain't over till it's over - but if time's up, time's up.

Fri, 06/19/2015 - 07:54 | 6213275 mojojojo
mojojojo's picture

Central banks won't let the market crash! Inflation low, they can't raise rates!

Take advantage of record low rates and pile on the debt!

Spend tomorrows income today!

Chase yield in the stock market, you don't wanna miss out!

All on red please! Woops! All on black this time! Woops!

Borrow credit and spend on consumer goods, maintain escape velocity!

Spend all your credit today, before the banks go on holiday!

Negative real interest rates! Fuck savers, we don't need capital to have capitalism!

We don't need workers to produce capital, we don't need savings with ZIRP!

Expand central bank balance sheet! The music must never stop!

The economy has recovered see, see the flat line of the interest rate!

Initiate cataclysm! Raise rates!

So many choices on the broken economy smorgasboard!

Which company do you wanna buy, Peter! I wanna buy the White House! Is that OK Paul!

Fri, 06/19/2015 - 08:55 | 6213435 starman
starman's picture

But Liesman said they have a solid 7% growth!

Or was it just lies man?

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