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Early China Strength Fades Fast As Margin Debt Plunges Most In 3 Years
Following the much-celebrated (and massive 13% swing low-to-high) bounce yesterday at the hands of a desperate PBOC, the morning session ended with an early boost fading. Shanghai margin debt has now suffered the longest streak of declines in 3 years and as BofAML warned they "doubt that this marks the end of the de-leveraging process in the stock market given that much of the leveraged positions are yet to unwind."
With both Manufacturing and Services PMIs printing above 50, stimulus is now clearly aimed at maintaining the bubble but as BofAML concludes, "after this adverse experience, we expect many investors will be much more cautious before investing into the stock market, we will be surprised to see a return of the unbridled enthusiasm of investors any time soon."
- SHANGHAI MARGIN DEBT HAS LONGEST STRETCH OF DECLINES IN 3 YEAR
Not the follow through everyone was hoping and praying for after Greece defaulted...
To summarize:
We doubt that this marks the end of the de-leveraging process in the stock market given that much of the leveraged positions are yet to unwind. We believe that the chance is high that we have seen the peak of this round of the rally in the A-share market.
We suspect that the government will be less blatant in urging investors to buy stocks going forward after seeing the potential damage that a leverage-fueled market can do.
After this adverse experience, we expect many investors will be much more cautious before investing into the stock market, using leverage.
The air had probably been let out of the balloon and we will be surprised to see a return of the unbridled enthusiasm of investors any time soon.
...
In our view, the selling pressure so far has mainly come from stock-related borrowings via various unofficial channels where the leverage is much higher. Besides, sentiment also plays a decisive role - if many leveraged buyers believe that the bull market is over, they may be inclined to sell due to the high interest cost burden.
Overall, we don't think that the deleveraging process in the stock market has run its course and the market may stay volatile in coming weeks.
* * *
Longer term, the psychological damage from the two-week long sharp market decline may linger for a while. This means that any market rebound will unlikely be strong in our view.
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Isnt this what the gov wants to achieve?
… who pocketed the PROFITS ?
3rd meeting with the wise men in last months tonight (just returned to hotel).
China is imploding, and government is pulling every trick in the playbook to conceal the pace and scale of their meltdown.
ZH: "psychological damage"?
Zero Hedge has spent far too much time with western volatily :p
performance of SSE this year is pretty much what most Chinese think stock markets are, only at a Chinese factor of rates and growth rather than at a western factor of rate and growth
this is less damaging and more positive reinforcement for a sentiment that already exists lol
TIS –
What's your gut feeling on whether or not China is likely to trigger the Big Event this year?
They had a taste for profits. As soon as their market recovers 2% they double up and flock in en masse.
I know a lot of investors who think like that and they all think they’ve got a system and that they can influence a stock with ninja mind tricks...-
It's amazing to watch the volatility on SHCOMP right now. There's literally not a single long-term investor anywhere in China at the moment.
It's bottoming! Pile inside!
+2% in five minutes
It's peaking! Everyone squeeze out quick!
-3% in five minutes
This must be that famous long-term thinking that I've heard about.
Som won bot bad debt vechacol
Wait, could be worse. Venezuela's inflation rate is now running at 510% per year, and still climbing.
Hooray for Marxism -- another evil free market capitalist economy has been destroyed!
Everything is fine because no one is doing anything and they're not going anywhere either.
Kick back! Relax!
It's all good!
Schrödinger's cat is dead, and it bounced yesterday.
Quoting a friend in Hangzhou two weeks ago. "But everyone is making money. Feel bad." Everyone there was feeling rich but her.
Stock markets around the world are getting bizark. Sign of impending meltdown.
The Tylers did just point out that many NYSE listed companies are plowing profit right back to the stock holder to keep the 'confidence' (thus no real potential for growth), but if there are still is lager enough group companies that are not paying dividends and the run for cash starts, the whole market will tumble with the herd mentality. Only those that have invested right and can circle the wagons and have enough supplies for atleast a year will make it out of a huge downslide. a 1987 senerio that is strung out over two weeks (those trading 'brakes') or more would have a very damaging psychological effect. Irrational exuberance would be cured for some time and there would be a lot of loosers.
Just a bunch of dumb, irrational fucks who refuse to take out more margin debt.
I'd bet that the 'Hand of God' (PBOC) caused a 'dead cat' bounce and they know it.. Probably from the JPM / FED playbook that they stole.