Chinese Stocks Crash Most In 19 Years, Re-Open Limit Down (Despite PBOC Hail Mary)

Tyler Durden's picture



This leave China's CSI-300 broad stock index futures up just 7% year-to-date...




  • *CHINA'S CSI 300 INDEX FALLS 3.4% TO 4,190.3 AT BREAK

After The People's Daily proclaimed... "investors were moved to tears" thanks to the PBOC's actions...



The bounce is dead. CHINEXT - China's tech-heavy high beta 'Nasdaq' - is down 5-6% today, 19% in 3 days, and 33% from highs in early June...!


In 3 weeks, it has given up half its gain of the year...

*  *  *

All that pent-up demand to be ignited among the farmers and housewives of China thanks to a double rate cut (RRR and benchmark) enabled a mere 2.5% bounce in Chinese stocks at the open which has now completely been erased as Shanghai enters a bear market. As The South China Morning Post's George Chen notes, the most dangerous idea gaining traction in the Chinese stock market is the naïve consensus among ordinary investors that no matter how bad the market gets, the Communist Party will eventually rescue everyone. If not them then, as Chen concludes, "It's time to wake up."


Spot the double-rate cut 'bounce'...



Decidely not what the doctor ordered... and as The South China Morning exclaims, many Chinese investors who have a planned economy mindset, believing government should help them, may well have a surprise coming...

The most dangerous idea gaining traction in the Chinese stock market is the naïve consensus among ordinary investors that no matter how bad the market gets, the Communist Party will eventually rescue everyone.


The central bank surprised everyone with its announcement on Saturday that it will cut its benchmark deposit and lending rates by 25 basis points - the fourth reduction since November.


Meanwhile, it also decided to reduce the reserve requirement ratio at selected banks to further ease liquidity in the banking system.

The unusual "double cut" move came just 24 hours after more than US$760 billion was wiped off the value of mainland stocks - equivalent to the market capitalisation of US technology giant Apple. The reasons for the market crash are complicated, including margin calls, tight liquidity at the end of the month, and panic. Afterwards, the most frequently heard question was, what will the government do to rescue the market. Rescue? Is this really government's responsibility?


China has been through the planned economy model for decades. This is especially ingrained in the generation of my parents, who make up the bulk of individual investors. Just as everything once belonged to the government, many of these people believe the stock market should also belong to the government. So it's the job of the government - in other words, the Communist Party - to rescue the market.


Unfortunately, many Chinese experts and professors are also promoting this naïve view of the relationship between domestic investors and the government.


After the central bank's moves on Saturday, many experts told state media that they believed the central bank acted mainly to rescue the stock market, given the timing of the decision.


Suddenly, investors who felt that Friday was the end of the world - with more than 2,000 stocks sinking - began to talk about what stocks they should buy on Monday morning.


"You still don't get it? It's now like the government policy that the stock market must go up. Otherwise, why bother asking the central bank to rescue the market?" said one investor in a post on Weibo. Many others echoed his views on the social media network.


Beijing has been talking about how to do a better job with so-called investor education for years. Unless the government corrects an impression that it is a last-resort market rescuer, risks will grow in the market and sooner or later the bubble will burst.


It's time to wake up. Beijing has faced more serious challenges than a stock market that is becoming more risky. If you want to rely on President Xi Jinping for everything, then your thinking may just be too simple and too naïve.

*  *  *

With Central Bank bazookas seemingly un-omnipotent, the fate of the world is in the hands of illiterate Chinese farmers and Greek grannies.

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q99x2's picture

A Greek ganny (as long as its not one of those ones with the mustaches) doesn't sound too bad with the luck I've been having.

Laowei Gweilo's picture

>>> "The most dangerous idea gaining traction in the Chinese stock market is the naïve consensus among ordinary investors that no matter how bad the market gets, the Communist Party will eventually rescue everyone."<<<


Dunno who they've been talking to but I haven't heard this sentiment at all. At best, the concesus is that the PBOC won't allow a total stock market crash... NOT that they won't let it slowly go down significantly. In fact, many think a controlled descent suits the PBOC just fine because it puts real estate -- their much more important asset class -- in a better light.

Dunno who the SCM was polling the Yulin dog meat festival or some shit but this sure as fuck isn't any sort of concenus even for ordinary average investors.

knukles's picture

Commie party gonna rescue shareholders.  Oh the irony

TruthInSunshine's picture

China went full retard and its stock market bubble will crash and 75% of existing "unrealized paper/electronic wealth" will be wiped out, making the 1999-2000 NASDAQ bubble, the general 2008-2009 US equity market bubble look like mild corrections in comparison.

In fact, the Chinese equity markets are the greatest bubble since the Nikkei 40,000 peak in 1990.

There's going to be blood in the Shanghai Streets and mass contagion from the Chinese equity, bond and RE market implosion.

maskone909's picture

what has two wings and a halo?

a chinese telephone, wing wing.. halo.

Tom Servo's picture

subprime is contained!


disabledvet's picture

"When the tide goes out you find out who's swimming naked."

Of course everyone sees money printing as inflationary...hence "bubbles are formed" and called "hedging."

But "fiat monies" can exhibit strange behaviors sometimes too..where so much credit and "faith" is extended the value of everything starts to fall at the same time too..

Gaius Frakkin&#039; Baltar's picture

So much fraud in China, yet their stock market can still go down... guess they're not the king of fraud afterall... I wonder who is? Hmmm...

macholatte's picture



China has been through the planned economy model for decades.


... and the Progressives still don't get it!

Fundamental Transformation


BTW:  Australia just might sink.  Time to short the Aussie... again? 


MoneyPowerWomen's picture

no way - we have our  housing market that will save us....this baby is not slowing down to 2017...honest!


cookie nookie's picture

Oddly enough, I still believe in the China housing market.  There's 1.3 billion people in that country.  They got to live somewhere.

booboo's picture

Why? They are living somewhere now.

NoPension's picture

I've been asking this question for months, here.

How do you provide electricity, fresh water and sewerage to all of that currently vacant property? Development requires infrastructure. Infrastructure is expensive and complicated. It IS the main limit to development, not money. And you cannot build a corespondent level of infrastructure for all of that vacant property, and let it sit idle. It does not work that way.

I would be willing to bet a lot of those high rises are connected to an extension cord, garden hose and port - o- pot.

Think about it.

thestarl's picture

Maybe,but when the correction comes sure will be ugly.

Early 2016 my best guess.

ebworthen's picture

Bubble?  Meet pin.  Pin?  Meet bubble.

Antifaschistische's picture

So, the Chinese Market has regressed back to where it was three freakin months ago and that's considered a meltdown!!

Just wait until the US Market realizes, that since Greece was never fixed, and in fact is worse now than it was in 2008 when the market priced that in and hovered around 10k (rounding).  They way I calculate it, we need a 40% correction with the realization that all the "it's fixed" pretenses were wrong.

TruthInSunshine's picture

The Shanghai will fall another 40%, minimum, and most likely another 45% to 50%.

The Chinese equity markets are comprised of so many shady, fraudulent sham companies, that it's literally impossible to overstate the extent of the pyramid nature of their gambling hall equity markets.

Yellen & Draghi are probably relieved that equity markets are going to break in a manner whereby they won't receive the blame.

Teamtc321's picture

Excellent posts as usual Truth. I'm hoping to catch a glimpse of of those who have cheerleaded for the Chinese over loads down below in the post tonight.......crickets? What, no new reserve currency playmates?

IMHO, just wait till fall when the currency swaps dry up, if you think it's ugly tonight........

Now, to all you Liberal technocrats who cheered for NAFTA and all the other word soup bills you have positioned to suck jobs out of this country by your bankster overlords in favor of these parasites, get you some you cocksuckers!!! You dumb MFER's.....


biggestbrother's picture

It will go down. 


Its the ruling gangster CCPs idea to give the ruling families thier money back.  Those serfs who have slaved in factories put life savings into debt ridden family friends companies.  Companies debt problems solved. Serfs yet again shoulder burden. 

Chinas power is its infiinite population of ignorant serfs for factory work, mao idolotry, xi adolatory, stock market company refi. 


Stand buy to watch the correction. Now remember all this money came from somewhere. And the answer is a transfer from the serfs to the famlies. yet again.  Money will go puff, but after families pocket gazillions to go and buy up Australia. 

Laowei Gweilo's picture

far far faaar more Chinese, including wealthy business owners and real estate investors, are OK with this than those against


precisely because they know the stock market went full retard


i'm constantly surprised how many factory or real estate owners i've talked to that have shown zero interest in the stock market. to a fault, even... because fuck they should have at least tried to make an easy 30-40%


but this notion that a stock market crash is impossible in some sort of public sentiment is incredibly misguided... probably as a percentage of population, more Americans own silver than Chinese own stocks lol


the FAR bigger PBOC concern from a stock market crash is not retail investors but corporations that used the stock market rise (and therefore bond yield rises) to become more reliant on issuing debt-back securities, REITs, and other investment instruments, or even invest in stocks with their own corporate portfolio


which isn't to say the stock market will be allowed to totally crash. and i've been somewhat of a SSE defender here by ZH standards. defender in so far as I've defended 'riding the wave' while there is a wave. but really, a casino full retard stock market is NOT in the interest on the PBOC. it's not bad per se because a GOOD stock market is a great distraction from the real estate market but they have no interest in a full retard market that begins to actually displace real estate investment, or, ffs, farming (to borrow one of ZH's fave quotes) so the PBOC doesn't want a total crash and chaos in their market but they also don't want full retard bulls either. you'll probably see them use their relative-to-the-west ample PBOC tools to try stabilize (relative to Chinese volatility, not western volality) and rather than make in great/horrible just try to make it 'good enough' to be a 'distraction' from real estate, corruption, manufacturing, or whatever other issues would be served by being overshadowed be the stock market.

suteibu's picture

It will certainly wash out the speculators.  How much Western money in the Chinese market?

Laowei Gweilo's picture

prob fuck all lol


it's a serious fucking pain in the ass to even get money into china because of stuff like FINTRAC here in Canada; for all the bs hype about the outflow controls that PBOC, it's far easier to get money out of china than in (even as a Chinese)... but then for a foreigner. to begin, you can't directly. then it's an effing hassle just to transfer money there to an account that even could theoretically. and that's a fucking hassle cuz you can't do it directly. you gotta use an intermediary in effing hongkong and then buy SSE stocks through the HSI

suteibu's picture

I see.  And thanks.  What about foreign companies or banks doing business in China through relationships with Chinese companies?  It's hard to believe the big banks haven't found a way.

Dindu Nuffins's picture

Disappointed if there's no contagion, suteibu?

This will hurt all companies like Walmart, Yum Brands, Kraft, car companies...

Sydney, New York, California, London, etc, real estate.

And actually, who knows what Chinese will do to the trillions in other stock markets that they assuredly have smuggled out the opposite direction. I wouldn't rule out a slow contagion.

suteibu's picture

I have no expectations, so I can not be disappointed.  I was simply seeking information. 

What's your interest?

artless's picture

Right. On. Schedule.

Host a Summer Olympics as a totalitarian, central planned, one party police state and nine years on said regime will go down the rat hole into the dustbin of History.

Nazi Germany: 1936 Olympics 1945 GONE

Soviet Union:   1980 Olympics 1989 GONE

China: 2008 Olympics: 2017. Put in your calendar.

The only hiccup in the theory is Los Angeles 1984.

Oh, wait, what?

Dutti's picture

Did you forget 2004 Greece?


tc06rtw's picture

 … what about  JAPAN - 2020 ?

Tall Tom's picture

Mexico City 1968...


Que pasa a la peso?

Tall Tom's picture

Gone Daddy Gone


Love has gone away...


As the party rolls on...

NihilistZero's picture

Illiterate Chinese Farmer slams Greek Granny in the Fanny!

Porn for the new millenia!

fockewulf190's picture

"In fact, the Chinese equity markets are the greatest bubble since the Nikkei 40,000 peak in 1990.

There's going to be blood in the Shanghai Streets and mass contagion from the Chinese equity, bond and RE market implosion."


Like a Yulin doggie would say: "Ruh roh!!"

e_goldstein's picture

The West wil sell the East the derivitives with which they will drown themselves,

or something.

OldPhart's picture

Ho Lee Fuk

Wei Tu Low

Sum Ting Wong

No Long Dong

Fuk me nao

ZH Snob's picture

the timing for the chinese population to get bullish on the stock market is laughable.

2015 will be remembered as the year the entire world began its descent into hell.

JustObserving's picture

Can they not clone a few hundred Kevin Henrys to save the Chinese markets?  How about cloning a few lying members of the Fed?

Failing that, China can always ban short selling of stocks for a few weeks.

order66's picture

Long Panda Express.

Dead Canary's picture

It look like the dead cat bump.

Id fight Gandhi's picture

We're gonna need more porcorn and beer. Fun times to watch the greedy assholes panic.

Dead Canary's picture

Hey! I am greedy asshole and I'm not panic!

Kirk2NCC1701's picture

If China wants to be taken seriously by the world, as an alternative to Wall St, they need to stop playing Footsy with the US/Fed, and come out with a Gold Yuan (backed 40% with Gold).

Until then, I wouldn't trust their Markets as far as I can spit.

disabledvet's picture

Why not Canada????

Unlike say...THE UNITED STATES...


TruthInSunshine's picture

Dude, Canada is as fucking bankrupt as any western nation, and more than most, with a devastated manufacturing base, and now a debt-to-GDP ratio that will rise massively as metals, oil, minerals, lumber, natural gas and other natural resources get slaughtered.

disabledvet's picture

So just print more Loonies is the answer?

I mean, hey...everyone else is doing it...what the heck could go wrong, right?

TruthInSunshine's picture

They've begun doing that, and the CAD has fallen 25% vs the USD in the last year.

They need to do much more devaluation of their currency to stem the bleeding in their manufacturing sector, especially now that natural resources are not bring home the Canadian Bacon.

Canada & Australia are in eerily similar economic & financial positions, with one relying mainly on the U.S. for its fortunes, the other on China.

Both nations are precariously perched on the cliff's edge.