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"Blood On The Streets": Chinese 'Nasdaq' Crashes Most On Record, Morgan Stanley Warns "Don't Buy This Dip"
China's "Nasdaq" - the 90% small-cap tech-firm dominated CHINEXT is down 8.3% intraday - its biggest single-day loss ever... it is now down 27% from its highs!
At the end of the morning session, there is blood on the streets of Shanghai and Shenzhen...
Remember, it's a no-brainer... As one middle-aged rural Chinese chap exclaimed jubilantly, "it's easier to make money from stocks than farmwork."
Maybe it's time to go back to farmwork after all...
* * *
So - do investors really want this kind of volatility in the MSCI indices? If China is allowed to correct now, it will wipe out trllions of wealth from the average Chinese person... at a time when regulators are urging professional asset managers NOT to speculate in stocks.
* * *
And this is what we noted earlier...
Is it time to step in and buy the dip in Chinese mainland shares after last week’s harrowing 13% decline on the SHCOMP? Absolutely not, Morgan Stanley says.
Beijing is fighting desperately to keep the country’s stock market miracle alive, as China needs a distraction to deflect attention from the flagging economy and bursting real estate bubble. But aggressive policy rate cuts and an abrupt 180 on LGVF financing for local government projects are working at cross purposes with efforts to deleverage the economy (which is laboring under a $28 trillion debt load) which include allowing for more defaults, reining in shadow financing, and restructuring a local government debt pile that amounts to 35% of GDP.
In addition to contradictory policy decisions, Beijing is also struggling to reconcile slumping exports with accelerating capital outflows, a combination which makes currency devaluation both necessary and impossible at the same time.
In this context, it’s easy to see why a stock market collapse would be a particularly unwelcome event and until last week, the music was still playing thanks to anticipation surrounding A share inclusion in FTSE and MSCI EM benchmark indices. Now, with China’s millions of newly-minted day traders having recently discovered that stocks can go down as well as up, and with a contraction of margin financing via umbrella trusts beginning to weigh, there are renewed questions about the sustainability of the rally. Here’s Morgan Stanley with more:
Our stance on China A shares is that this is probably not a dip to buy. In fact, we think the balance of probabilities is that the top for the cycle on Shanghai, Shenzhen and Chinext has now taken place. We remain concerned over four factors: a) increased equity supply, b) continued weak earnings growth in the context of economic deceleration, c) high valuations, and d) very high margin debt to free float market capitalization. Our Shanghai Composite Index EPS forecasts for 2015 and 2016 are significantly lower than consensus (5% vs. 9% for 2015, and 8% vs. 16% for 2016).
We set a new 12-month Target Price range for Shanghai Composite of 3,250-4,600. This range is -30% to -2% below the current level of the index (4,690 as of June 24 close). Our base case EPS integer forecast for Shanghai for June 2016 is 259 versus consensus' 279 (7% lower).
We forecast 5% base case EPS growth in 2015 and 8% in 2016 for the Shanghai-A index, which is significantly lower than the current I/B/E/S consensus numbers of 9% for 2015 and 16% for 2016. Recent earnings growth trends continue to be poor. Trailing EPS y-o-y growth rate for the Shanghai Composite Index in June has dropped to -1.3% from 7.3% a year ago. For the Shenzhen Composite Index, yoy growth has dropped to 6.8% from 11.5% a year ago. This poor momentum in EPS in a forecast continued weak economy is the primary reason why we have modeled for below-consensus EPS growth.
In summary, we project that China's economy will continue to struggle over the next 12 months as it transitions towards consumption- and services-led growth in the face of the legacy of the rapid build-up in leverage in recent years and significant excess capacity in the 'old economy' sectors. As a result, our base case June 2016 12-month EPS forecast is 259, 7% lower than the consensus number of 279.
We have often heard in recent months that the Chinese authorities would not allow a market decline as we are now forecasting. The implied move from the peak on June 12 – if that is the peak – to the lower end of our new Target Price range for mid-2016 would represent a decline of 37%. Certainly, it is true that the Chinese authorities have been more vocal in their support for the development of the market in this cycle than in previous cycles, where major declines occurred within one year after the peak. However, our general view is that governments are not able to exert direct control over stock market behaviour, in particular where trading volumes, valuations and margin leverage are as stretched, as they are now in China. For us, ultimately this argument against a sustained bear phase for China A shares over the next 12 months sounds almost as dubious as what we were hearing in late 2007. Then, it was frequently argued that the Chinese authorities would not let the A share equity markets decline before the major international prestige event of the Beijing Olympics in August 2008. The Shanghai Composite fell by 57% from the peak in October 2007 to the opening days of the Beijing Olympics.
And sure enough, based on CSI-300 futures, China is not seeing any bounce whatsoever after yesterday continued crash...
With cash marketsdown sharply now they are open...
- *SHANGHAI COMPOSITE SLUMPS 3.5% AT OPEN
With CHINEXT in a bear market - they are trying something else:
- *HIGH-TECH COS. ACCOUNT FOR ABOUT 90% OF CHINEXT FIRMS: XIAO
- *CHINA TO START EQUITY CROWDFUNDING TRIAL: XIAO GANG
and the rest of Chinese stocks in correction at best, one wonders if the PBOC will stand idly by as the bubble they unleashed crashes and burns bringing down most of rural China's wealth with it...
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The only dip I'm buying is the kind that can be traded for silver or copper bullion after SHTF.
That's because Morgan Stanley is shorting it.
Chop Suey or Chow Mein?
China, along with Japan (then Spain, Italy & France - yes, France) are going to bring about the next major global economic crash, yet nearly every 8th article posted on ZH proclaims that China will emerge as the primary economic and military superpower in the near future.
China is in a literal struggle just to keep breathing. Its economy is smoke & mirrors - far more so than any major western economy - and leveraged far higher.
Look at China electricity usage, rail traffic, shipping utilization, capital flight, etc. - China has dysentary.
Many multinational corporate CEOs are fretting now as they watch their plants, facilities and capital invested on Chinese soil become more and more at risk of bets gone bad - this after seeing their proprietary technologies and intellectual property stolen outright by their mandated JV partners in China.
The China implosion, coupled with the Japanese one, is going to be the catalyst that sets fire to the world. No one will be paying attention to a Grexit, or even a Spaixit, Italxit or even Frexit, soon.
It's a house of cards. China isn't in any better a position than any of the other shitty world governments. When they all fall the UN will ask for power and world governance. Say no.
Own silver, be your own bank, and don't be relient on government.
i wanna see a billion and a half slaves ask their controllers why they were screwed. will make great tv, dare i say epic?
If they are slaves then you must be the western equiv.of a minion. Both technically the same, just one so stupid he/she dunno his predicament! LMAO!
Hey now.
Minions get colorful uniforms to signify their allegiance.
this is such a small thing for vast majority of middle to upple class china lol
might as well be talking about the effect of bitcoin or silver on the average american's rrsps
most chinese are still by far not anywhere near stocks and in real estate
now, of course, it's all linked... and the CORPORATE effect of the crash and especially corporations issuing debt and especially funds, REITs, etc will have ripple effect
but that comes later
im nobodys minion, but i do know what overshoot means, and soon so will the red chinese slaves.
oops.
welcome to the modern world of finance, comrades.
regarding the minion controversy: i'm reminded of john steinbeck's observation about the poor in america:
they don't know they're poor. they think they are temporarily embarrassed millionaires.
Well, the upside is that there are plenty of flats that the privileged purchased at a premium that will be occupied by the masses when they get enough gumption to take them.
WOW - This page is lagging like a snail. Literally, I try to scroll down and the page stops and starts like a jerky old black & white movie. I see no embedded video, but some asshole just started speaking French, and I'm getting cross-site scripting alerts. WTH?!? I'm out.
Try rebooting your 2400 baud modem.
It's Firefox. More like Failfox. Or Faggotfox.
hey every fuckhead at zero that doesn't understand wtf is going on, it is overcapacity from overstimulus VIA fake fucking money. china one of the best with anything FAKE.
fake up fookers...
some call it deflation...
Shut up, get back to your fucking banana cart and BTFD!! Then, call you Nainai, and tell that crocheting bitch to grab her yuan with two fists and BTGDMFD (buy the God damned mother fucking dip)!!
haven't you realized yet?
Zero Hedge is pro-China when it comes to anti-America
but anti-China when it comes to anti-stock markets
To be fair, there's nothing anti-China about pointing out that their stock markets have/had become ridiculously inflated bubbles. Anyone who claimed they weren't bubbles was a fool or a propagandist.
yeah for sure... when I say anti-China, I just simply mean negative POV on China-something, negative on China's prospects in a regard -- not specifically against China or Chinese
like, when it comes to China's stock market, it's AHH THE WORLD IS FALING CHINA IS DOOMED
but when it comes to the USA, it's AHH CHINA IS ENTERING A GOLDEN AGE GOING TO CONQUER US ALL
:P
You are dead wrong. China will emerge as a superpower and a world leader, just like Murica did after the WW2. The Chinese market in the West is dead, since consumerism cannot go indefinitely in the end, so there will be painful adjustment for everyone: for China with market lost in the West, and for the countries in the West to adjust with the new reality and start living within their means. But let me share a little wisdom with you: China is far better positioned to navigate through the coming storm than countries in the West are. The new world has to be born, a world freed from Western degenerations, parasitism, corruption and decay, and China is going to be its leader.
With VIXX you get egg roll.
Me too. And i'm laughing.
There's more than one way to skin a cat... which is what rural China will be having for dinner
Biggest one day dip ever; wait for it; you ain't seen nothing yet. The Chinese are new and naive at this; even compared to Americans; the crash is going to be Amazing.
You can distract a population with asset bubbles, or war. You chose asset bubbles. You may still get war.
War comes when the asset bubbles fail.
translated "ITS ON LIKE DONKEY KONG"
Careful a truck load of q2 window dressing has been ordered.
yup and there will be even moar......they will find a diminishing return as the rallies turn into selling frenzies but oh how those bear market rallies hurt. I wouldn't be very aggressive shorting anything in these casinos. Its going to clean out bear and bull alike when its over
"Now if you'll excuse me, while I buy this fucking dip." - Morgan Stanley
not this time. they are not complete morons
Morgan Stanley... the other Goldman Suc...
I would love to see the CSI-300 fall 30% in 30 days. I just bought puts on ASHR, the CSI-300 chinky index. CHAU is the CSI-300 chinky etf 2x, it was down 10% today but puts are not cheap. CHAD is the short etfx of CSI-300, nice symbol huh? lol
No, that's CHOAD yur thinking of.
good luck buying option in CHAU its completely illiquid, ASHR is a good bet, i'm buying AUG calls in ASHR, just to see what happens. Dont underestimate the Chinese need to gamble and chase yields. Also BOC will probably do something over the weekend for a monday pop .... or it just goes down
morgan stanley doesn't know jack shit about anything.
That is usually the case....
The dippest dip orchestrated by joined forces of Zhoudip and Abedip.
look-ee, look-ee...balls on hook-ee
If the war is between western bankers and China, China will buy up the market with their infinite fiat unless the west has already begun to implode.
The stock and bond market is a fraud. Useless paper for useless paper that don't even exist.
I put my money in things that I can hold in my hand. As a matter of fact I love ringing silver. I sit here and ring silver just to hear it ring.
Sometimes I put a bunch of silver rounds in my undies and dance around the house just to hear them ringing against each other and feel them jiggle against my skin.
Heaven! Pure Heaven!
And the Mexican Peso rings the nicest of them all. I know it isnt .999 but it rings so nice.
Ring a ding a ding a diiiiiiiing. Nothing rings like Silver.
except a double eagle.
Sometimes I put a bunch of silver rounds in my undies and dance around the house just to hear them ringing against each other and feel them jiggle against my skin.
Glad to see I'm not the only pervert on ZH. There is something truely magical to have gold and silver wrapped around your balls when you just take a shit, let alone do the macarina.
If you ain't got it, you ain't understanding,
"I wouldn't buy silver or gold because there's nothing backing it" - CNBC bimbo
Its digital paper, why, its as good as...
There is not as much money going around to buy Chinese stuff. American incomes are stagnant and any extra income needs to be used to buy ACA insurance.
The solution is clear: more QE....and cowbell.
Chinese can be aggressive gamblers.
The article says the Chinese should go back to farming. Well I'll tell you what is wrong with society - when stock trades, which do nothing more than scalp real earnings, are worth more value than farming food, which people need.
When are these idiots going to be instructed by big brother to buy gold again?
Geneletional buy.
Hit the circuit breakers.
It's not a bubble!
BAHAHAHAHA!
China's Biggest IPO in Years Out Today -
http://www.cnbc.com/id/102790051
My broker, Buy da Fuk Dip just called me...He said my Chinese Checkers stock is a bright spot in the market over there...1 billion Chinamen will soon have lots of time on there hands.
Winning Bitchez!
Market dump GOOD!
Farmer thing is just PR bullshit. But you will see many morons leverage via margin practicing superman! Stupidity has no boundaries, its a global phenomena. Rural farmers are dumb by definition, think how stupid it is when some tech guy or wall st. guy who's suppose to be SMARTER also get hit by the dump. Dun worry, plenty coming from the US/EU, laughs will be all around.
When Chinese housewife jumps, who cooks dog?
Bad for American colleges. Good for college classrooms.
Bloomberg Asia just said that the shanghai just fell to its lowest level since january.
The only sound piece of advice I ever took to heart about the stock market was from William J. O'Neil. In one of his books he wrote the following (and I may not have it exactly correct):
"In a bear market, stocks can lose up to 90% of their value, or more..."
It was the "or more" that got me out during the first Internet bubble burst, and prevented some rather large losses. I had been following his investment advice on the way up and netted some great gains the year before...
Good luck to all the Chinese, you are going to need it. Because your house of cards has just collapsed. Next to go down... U.S. stocks...
As with every bubble of this sort it's back to the mean of around 1750 points. Probably a complete selloff below that point when even the most hardend investors throw in their towels..then you can go buying the dip!
I thought the only thing the Chinese were buying was gold...
They bought and crashed that in 2011.
Ride the roller coaster you traders! This is one rodeo show!
Don't cry for me Argentina!
Since Jan 1 the Shanghai composite is still riding high!
In fact it makes the DJIA look like pale rider. (Still 50% up as opposed to 0-1%)
No one could have seen this coming.
We are going to wake up one day VERY SOON and read about the chink markets crashing 20% over night
Impossibru... Limit-down is 10% for each stock, so the combined total for every single one hitting limit-down is... 10% in a day.
We are going to wake up one day VERY SOON and read about the chink markets crashing 20% over night
Wish I knew when the American markets would crash 20%.
RED IS GREEN
GREEN IS RED
STRONG ECONOMY, US STOCKS DOWN
WEAK ECONOMY US STOCKS UP
STOCKS DOWN< BONDS DOWN
STOCKS UP< BONDS UP
I MEAN THE CENTRAL BANKS HAVE COMPLETELY DESTROYED THE FREE MARKET
Dont touch this chinese thing. I mean you would have to be BANANNAS!
Panic on the streets of London
Panic on the streets of Birmingham
I wonder to myself
Could life ever be sane again?
The Leeds side-streets that you slip down
I wonder to myself
Hopes may rise on the Grasmere
But Honey Pie, you're not safe here
So you run down
To the safety of the town
But there's Panic on the streets of Carlisle
Dublin, Dundee, Humberside
I wonder to myself
Strange that MS has stepped in with this call - The world should be wondering what MS is up to once again and why part of their business should not be scrapped by now and sold - it is time to look into MS's balance sheet and other financials.
I see potential reversal around ~2500-2700+-. Also it is sharply down 27% and 8.3% in a single day and Morgan says "dont buy"?! Really? Although nothing is ever guaranteed, this to me is a high probability buy based on above and price action itself. It should be clear why Morgan tries to scare everyone, they want to buy it - preferably from you!
The farce is strong with this one.
Just have some "plunge protection team" there and give currency people invested back to the people. They won't learn anything from it, true, but the whole scheme with paper and pixel currencies is such a travesty that it doesn't matter anyway. The world needs a true and honest money, the only money ever to exist since the dawn of any civilization -- gold and silver with the gold standard back!
Haha. This is fantastic. Bunch of retards and they deserve to get fcked.
Yep, I bet they still shake their heads how was it even possible for price to go down despite buying at all time highs. Retards buy at the highest level in history and expect it to continue lol ;).
China will do all right, they are much more self-sufficient and thus prepared for any crisis than people in the West. Besides, the government has huge amounts of gold (exactly for the occasion of a collapse). Does the USA still have gold??? Besides, China has started building its connections to most countries of the world, they have purchased so much real physical properties all over the world already and these will remain in their hands after the collapse. The only problem of China is that it is still too much connected to the stupid Western bankster debt-based economic system. But if there is any collapse it will only convince them more that they must shut themselves off the failing banker system and have their own, which they are now building within BRICS. The Chinese are proud people and also very pragmatic, they know that the world is a cruel place, they dont expect any ideal societies, miracles etc. They know well that life is struggle and hardships, unlike the Western people. And most of all, the Chinese will never accept to be westernised, no matter what. This is the strength of old civilisations. Just read this, it is hilarious, China slamming the USA hypocricy: http://thebricspost.com/china-slams-us-human-rights-record/#.VY1dxuduEpU
That 'forced abortion/one baby per' was a nice touch of such a 'glorious society', huh. Yeah, I remember when you folks were workin' the rice fields. Your ilk didn't work the fields? Who woulda guessed?
"Who's on first?"
"The Bankers!".
"Where would the Politicians be, on second?" "No, no, Politicians are on third". "Politboro is on second"? "Who's in the Politboro" Who's controlling the markets? Why? What?? BTFD?? No more rice fields for you, pal. Things are going to get really weird soon.