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

Tyler Durden's picture

Carnage...

  • *CHINA STOCK PANIC SELLING TO CONTINUE, CENTRAL CHINA ZHANG SAYS

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

  • *CHINA CSI 500 STOCK-INDEX FUTURES FALL BY MAXIMUM 10% LIMIT
  • *CHINA CSI 500 STOCK-INDEX FUTURES FALL BY LIMIT FOR 2ND DAY

  • *HKEX DROPS AS MUCH AS 7.3%, MOST SINCE SEPT. 2011
  • *SHANGHAI COMPOSITE INDEX EXTENDS DROP TO 7.5%
  • *SHANGHAI COMPOSITE HEADS FOR BIGGEST 3-DAY DROP SINCE 1996

Carnage-er...

  • *CHINA'S CSI 300 INDEX FALLS 3.4% TO 4,190.3 AT BREAK
  • *CHINA'S SHANGHAI COMPOSITE FALLS 3.8% TO 4,035.48 AT BREAK
  • *CHINA'S CSI 500 STOCK INDEX FUTURES EXTEND LOSSES TO 5.7%
  • *CHINEXT INDEX PLUNGES 7.8% FOR 3-DAY 20% SLIDE

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

  • *FOUNDATIONS FOR A-SHARES ARE `SOLID': CHINA SECURITIES JOURNAL
  • *CHINA STOCK MARKET TO HAVE 30 YEARS `GOLDEN AGE': SEC. JOURNAL

 

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'...

  • *SHANGHAI COMPOSITE SET FOR BEAR MARKET AFTER 20% DROP FROM HIGH

 

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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Mentaliusanything's picture

In Straya's case its terrifying how badly managed we are, run by a certified Mad Monk on one side and on the other the Greens/ Labor alliance that could not run a school canteen. The Pay as you go workers are screwed every which way they go. 

Need to be fully reset and the power given back to Engineers, Surveyors,Scientists and Hard Men who know how a dollar is produced.

Motasaurus's picture

1959 - the year Australia died (not that we ever really lived to begin with. We have always been "more British than the English"). The year that the Reserve Bank Act was (probably illegally) singed and our right to money was replaced with banker issued currency. 

Appleseed's picture

Not one mention of our booming housing bubble? Ya, we're fuccked

Appleseed's picture

Not one mention of our booming housing bubble? Ya, we're fuccked

SamuelMaverick's picture

Kirk, gotta say you are not thinking straight.  Gold as a reserve backing is only legit if the entity running it is honest and honorable.  I laugh when I hear this bullshit. Who is gonna run this future Gold backed currency ??  The Chinese, Russia, the new Bric's version of the IMF?? Seriously, COMEX and LBME are outright lying thieves,  and every financial structure in the USA and Europe is corrupt to the core. I definitely do not know the answer, but I do know with 100% certainty that every government and financial entity that are currently running the show are lying cocksuckers, and that must be taken into account when doing business with them. 

 

                    Maverick

disabledvet's picture

China now finds itself exactly where Japan and Europe find themselves...namely in the throes of a liquidity trap.

All three are MASSIVE economic Superpowers and all three are executing on Beggar Thy Neighbor economic plans thus "digging the hole deeper."

Good luck being long commodities for the next thousand years...

Dragon HAwk's picture

Decisions Decisions.. do i stay up all night and eat popcorn, and watch it unfold, or do i go to bed early and start drinking in the Morning.

Stormtrooper's picture

Just stay up all night eating popcorn and drinking.  You can find out what is going on between delirious tremens.

OldPhart's picture

Same dilemma.  Do I get to see a hat trick tonight...Greece, Puerto Rico, China (or some other nation)?

Tomorrow's opening is one I don't want to miss and I'm on California Time.  That's freakin' early for a non-morning person.

...

Beer  check

Cigs  check

(Hate popcorn)

Pistachios/Almonds  check

Piss rock outside   check

Tall Tom's picture

Guess it was a bad day to quit smoking Hopium...

Soul Glow's picture

China is so fucked.

Tall Tom's picture

Yeah...So is the rest of the Globe.

 

We are gone.

 

Turn Out The Lights...The Party's Over

 

Willie Nelson.

 

https://www.youtube.com/watch?v=QoQZ0qmf-mk

ThroxxOfVron's picture

We to low.

Where went Jiabao?

Now see Jinping:

Prop up my thing!

cherry picker's picture

Maybe if 'ignorant' farmers and Grannies were running the show we wouldn't be in the mess the over educated economists, shyster banks and prostitute politicians got us into.

Economics is simple.  You can't spend more than you bring in.  Farmers and Grannies know that all too well.

Implied Violins's picture

They always divert attention away from themselves, don't they?

It's long past time to put an END to 'divide and conquer.'

It is now time to 'draw and quarter'...BANKSTERS.

disabledvet's picture

Just change the name of the IMF to the

URF'ed...that's all we need to do..

Stormtrooper's picture

"You can't spend more than you bring in.  Farmers and Grannies know that all too well."

Is that why farmers have been using 5x margin to buy Chinese stocks?

cherry picker's picture

Who is the bigger fool?

The farmer who 'invests' in stocks.

Or the loser who loans him money on margin to make these purchases?

That is like a lender (credit card company) giving cash advances for people to play in a casino or hire hookers at the'Ranch'.

I don't feel sorry for that bunch at all.

Mentaliusanything's picture

Collecting on that Debt is going to leave such a mark, that even a Chinese Laundry won't shift.

buzzsaw99's picture

the only real question is at what level does the pboc step in and start buying.

If you're not inside, you're outside, OK? [/Gordon Gekko]

disabledvet's picture

Until the NY open at 9:30AM tomorrow the only market open for business is the market for dollars.

That is the only trading I see going on right now...which might be true for a long tIme i might add...

Luckhasit's picture

All according to plan.

pragmatic hobo's picture

i think just about everyone in china were banking on msci being the "grater fool" to which they can sell to ...

disabledvet's picture

There are no banks in China...

whoknoz's picture

..."the reasons for the market crash are complicated, including margin calls, tight liquidity at the end of the month, and panic"...

What's so complicated about PANIC! ??

 

Bull Bear Nice Pair's picture

Remain calm, buy it when it's down - remember, $21 trillion Chinese deposits has no where to go.

tarabel's picture

 

 

Those poor Chinamen.

No mattresses.

 

Baldrick's picture

You go away!

You come back!

Bull Bear Nice Pair's picture

4.85% is a lot of interest rate for PBOC to cut - buy the dip!

user2011's picture

my condolences... revolution is coming..

jonjon831983's picture

What's terrible... I hear a lot of the supposed suicides back around when the market crashed before the Great Depression there were caused by people going on margin and finding alternative ways of borrowing to gamble on the stock market.

The Ingenious Gentleman's picture

Here's one like that earlier this month:

“Before leaving the world, I wish to say I concede defeat. With capital of 1.7 million yuan and four-times margin, I bet the entirety on China Railway Rolling Stock Corp (CRRC). I have only myself to blame, nobody else.”

So reads the suicide note left by a 32-year-old stock market speculator from Hunan who jumped to his death in early June after losing his life savings within two days. The man took out a huge loan worth four times his own capital from a ‘grey market’ lender. Believing the government’s gargantuan ‘One Belt, One Road’ plan was a sure fire bet, he staked everything on the state-owned railway carriage builder. Source

Alpacanio's picture

Illiterate Chinese farmers, Greek grannies AND lazy Puerto Rican's. Fixed it Tyler...

mctimm's picture

Canada has lots of gold in the ground but very little in foreign exchange reserves!

GRDguy's picture

I suppose this gold comes under the heading "Deep Storage."

mctimm's picture

Most Chinese have known nothing but a bull market in equities. Hopefully the expensive education they are now getting will make them smarter in the future. I wouldn't hold my breath that they will learn anything. When a new generation comes around, they make the same mistakes as the older one.

 

The Ingenious Gentleman's picture

People's memories are so short. They never learn. Exactly the same thing happened in China June 2008. 

q99x2's picture

Looks like it would have been better for the retail Chinese investor to stay out of the stock market. 33% is a huge chunk of cash to lose it you don't have much. I wonder if the western banksters weren't behind this as a way to destabilize China..

BoPeople's picture
BoPeople (not verified) q99x2 Jun 28, 2015 10:33 PM

Japan Redux ...and all because people believe the fantasy that there are free markets in this world.

suteibu's picture

It's serendipity for the Western bankers and politicians.  The timing is merely coincidental.

Why...it's almost like God is taking America's side.  Like...like...Manifest Destiny.

 

Oh regional Indian's picture

Isn't that the coincidental truth there suteibu....

Just in time, the Greek contagion, the Chinese contagion, the Euro contagion, the Rouble crisis....anything, anyone........just so there is no Wall Street contagion.

Bustards...

Solarman's picture

Should not have legalized Gay Marriage.

BurningBetty's picture

Given that your positions are not leveraged yes. But, as we all know, most investors are no longer not leveraged so those losses are guaranteed to be considerably more then the "mere" 33%.

BurningBetty's picture

Given that your positions are not leveraged yes. But, as we all know, most investors are no longer not leveraged so those losses are guaranteed to be considerably more then the "mere" 33%.

Normalcy Bias's picture

<=== Short beef!!

<=== Long cat & dog!

BoPeople's picture
BoPeople (not verified) Jun 28, 2015 10:31 PM

The kids never listen; not that the Chinese are children simply that they do not have as much experience with the criminal banking element.

suteibu's picture

"It's time to wake up."

True on a global scale.

Time for Xi to stand up and be a true leader....not a Jean Claude Juncker wannabe.

Bunga Bunga's picture

The promise of a "30 year golden age" sounds like even better than the "permanently high plateau". What can go wrong?

Ms No's picture

I don't claim to begin to understand what is going on with the corruption in China and the factions vying for power there, but if it's not the big bank faction in control they may decide they prefer not to wait for the Zionists to pick the timing of the collapse.  If I was them and I had the ability, I would try to implode it early.