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Chinese Government "Losing Control": Stocks Are Collapsing, Hitting New Bear Market Lows
As one local reporter put it, despite being told not to say anything negative, "the government appeared to have lost its ability to manage the market." Chinese stocks are down 4-5% at the open, pressing new cycle lows with Shenzhen and CHINEXT now down 25% from last week.
As The South China Morning Post reports, many investors said the government was at least partly to blame for the collapse because it encouraged them to go into the market - for months, state-owned media have issued daily commentaries to encourage people to load up on shares.
And now the payback: even more utter carnage:
The longer-term perspective:
Leading to the local version of "brokers with hands on their faces":

As The South China Morning Post explains, a series of lifelines from Beijing failed to stop the slide in the mainland's stock market on Thursday, with the key Shanghai Composite Index closing below the critical 4,000 mark for the first time in almost three months.
Analysts warned that the nation's leadership would pay dearly if it failed to stabilise the market and prevent millions of small investors from losing their life savings.
"The government's response to the fall confirms that it will use all the resources at its disposal to influence the market when things do not go the way it wants and potentially puts its legitimacy at risk," said Steve Tsang, chair of the School of Contemporary Chinese Studies at the University of Nottingham.
The China Securities Regulatory Commission said last night that the stock market had recorded a significant drop, and the commission would launch an investigation into suspected market manipulation. Those suspected of committing an offence would be handed over to public security agencies.
...
Since falling off a seven-year peak of 5,166.35 on June 12, the Shanghai index has lost about a quarter of its value, with the mainland equity markets heading into bear territory after fears of a tightening of margin lending induced a sharp correction.
Turnover in Shanghai dropped to 732 billion yuan (HK$926 billion) on Thursday, down from 1.015 trillion yuan on Wednesday. More than 1,400 mainland stocks finished down, with large state-owned banks and oil majors the big exceptions. Shanghai-traded PetroChina rose 8.8 per cent to 11.68 yuan, while Sinopec gained 6 per cent to 7.18 yuan.
All four big state-owned banks posted major gains as investors looked for safe havens.
"The deleveraging process in the stock markets and the over-the-counter platforms trading shares and futures is ongoing, leading to a big price movement regardless of Beijing's proactive monetary policies," said Ben Kwong Man-bun, the head of research at brokerage KGI Asia.
Those proactive policies included a fourth round of interest-rate cuts last weekend and the reduction in reserve requirements for some banks.
Many investors said the government was at least partly to blame for the collapse because it encouraged them to go into the market. For months, state-owned media have issued daily commentaries to encourage people to load up on shares.
Tsang said the government appeared to have lost its ability to manage the market.
"Will the government be able to change market sentiment if its initial interventions prove ineffective? Time will tell," he said.
The central bank said it would pursue a prudent monetary policy and keep the economy growing at a "healthy" rate.
And considering the HSBC Service PMI just plunged from 53.5 to 51.8, the lowest print of the year, that may be complicated especially if the government is truly helpless to halt the crashing stock market,
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bwy de foking dip you mowons
The bubble is popping. ALL HAIL THE BUBBLE.
China & Russia and their new, joint bank and currencies are going to allow both to take over the world as the next economic superpowers - Zero Hedge has been saying so since 2009.
They published Hugh Hendry and Jim Chanos saying China would crash. Why do you think ZH is pro-China? The name of the site is ZERO Hedge lol
Ever get that feeling that you may not make it to the bathroom in time?
As Geordi LeForge might say, "We're losing containment!"
China is the biggest basket case of any major economic power in the world now, and by a fairly wide margin.
The whole world is sick, but China has malignant cancer of vital organs.
Their equity markets are such a carnival ride that they ALMOST make the U.S.'s and Europe's look somewhat sane (though they aren't by any measure) by comparison, and China's manufacturing health is crashing at terminal velocity, with a massive Chinese RE bubble to boot.
Chinese command/planned economics didn't cause this, Photo from the trading floor shows that those 4 ladies broke the market, just lookat'em. I'm sure they will sign the confession after they hear that their husbands and kids won't be shot too....
Dispatch them.
I'm going to tell you people something. This is the perfect time to buy an apartment in China. No kidding. Run. Don't walk.
I'm not too worried about China. Although corruption is pervasive, the Comunist governemnt there will not tolerate lots of poor folks (the bottom 60%) losing their money on anything whether it's RE or stawks. It's too dangerous for them since 1 billion, plus or minus, Chinamen, unlike Merikans, can get awfully riotous in these situations.
They will prop their stawk market up as good as or better then the ponzi team at the fed.
They will calm down for gubmint fish heads and rice.
Chinese riotous?
I can't thing of any major riots in China since the Boxer Rebellion.
The Chinese are rather subservient.
They do not have the same problem that the West does. An ethnic group that does have a history of riots.
so you say....
At least, China have a lot of manufacture and industries on mainland unlike countries like US and Europe who don't have industries anymore in top of being uncompetitive...
Now, what you will tell when SP500 will go back to 1500 or when QE4 will be launched ?
Side note: the "collapsing" China bought us 18 billions $ of French Airbus (bye bye Boeing) and have the capacity to bail out Greece, take that...
Actually, didn't I just read a blurb about how Hugh Hendry's fund got it's ass handed to itself about going in heavy on China right before the fall?
Not so sure about that. China runs its economy like a game of Monopoly and Russia wont survive for ever on energy when economies become "greener". China cannot control capitalism in its own economy let alone the rest of the world. THey are not as clever as they like to think they are.
I am not sure about China, I hope they do pull through, though they obviously will have lots of troubles. But I am more and more sure that Russia will be the one, who will be better off than anyone. They seem to be the only country preparing for what is to come. I quote: "The Russian agriculture continues to boom. It's rather clear that food security is one of the major self-sufficiency priorities of the Russian government. Overall, the scale of the efforts aimed at insulating Russia from external shocks (as well as military threats) suggests the Russian government is expecting literally the worst to happen at some point in the foreseeable future. What shape that "worst" will take is as yet unclear. But at the moment Second Great Depression sounds rather more likely than Third World War."
I for one, welcome our new bubble overlord.......
In case you guys haven't been following along, the Chinese government despises bubbles and has a habit of trying to stomp on them. They did this with real estate a bunch, rasing down payment requirements to 50% and making it so that people could not get third mortgages for any reason. The Chinese have a different system.
So they move overseas brought where they are allowed and those countries get a bubble and the young get unemployment.. I just know in 1 hour they will be hungry again.
Where is a good virus when your looking for one
China has a different system--that's right--rules don't mean anything there. Many ways of circumventing the number of units one can buy restrictions and down payments are mostly debt financed through shadow banking.
bubble is poppinp? beenhearing that for 6 plus yrs now.too funny-get some new material brother.
bubble is poppinp? beenhearing that for 6 plus yrs now.too funny-get some new material brother.
Yea their market is barely up 50% on the year now, the horror.....
Oh shit, coming to U.S. and European markets faster than Chinese take out!
BTW - the same B.S. in the U.S., S&P pilloried for putting out honest debt ratings!
So state run banks are safe havens and people are saying .gov lost control?
To borrow a handle: WTFReally?
Iron ore's still getting exported from Australia in higher volume than ever, lots of construction and production occurring all over Asia, regardless.
creepy...
… where’s FDR when you need him?
(maybe Schäuble, with a cigarette holder)
"... commission would launch an investigation into suspected market manipulation. Those suspected of committing an offence would be handed over to public security agencies."
The offense of refusing to BTFD
hence forth any and all selling is considered "unpatriotic"
The commission just wants to know the timing of the next bottom-top-bottom cycle.
No wrongdoing will be found, if they get their cut.
Better appoint a commission to oversee the commission!
Welcome to the jungle chicoms.
China's worse nightmare is social unrest. They made this bed, let the rulers sleep in it.
The home ownership is 80 percent plus in China, they also have $21 trillion deposits - in other words, most Chinese are stake holders who have worked very hard to reach their current living standard and would hate to see their hard earned assets gone in a riot in a flash - totally different mentality from debt slaves here in the U.S.
Slaves to the dollar is more like it.
"So rich we can't live in our own respective countries."
"Our biggest export is our citizenry."
Sad State of Affairs when you can't even devalue anymore.
Feel sorry for the Government Folk who all will get "Greeced" here but hey...this was even Dictatorships are all about now would appear...
$21T
$20.9T
$20.8T
$20.7T
Stop me if you've heard this one before.
Yep. Vast amounts of money can vanish overnight.
hmm chinese gov hasn't figured out they can directly buy up futures like they do in the US
Asian contagion
Asian contagion
"... with the key Shanghai Composite Index closing below the critical 4,000 mark for the first time in almost three months"
So the stock is at a 3-month low - big deal
exactly
3months 7 days round trip
Margin calls .. crickets.....Margin call.
Wee Tu Low.... Holy snapping chopsticks.. To get rich is Glorious.. to be sold up sucks balls. Fuck rice farming I only get one yield of rice per year and we inherited a financial disease from the West.
I owe I owe its off to work I go.
Pull the money out NOW
"With no way to devalue."
BRUTAL!
China to become a massive coal exporter to the world????!!!
wi tu lo, bit-chez.
Ho Li Fuk
Well, someone had to bring it back up.
Now with even moar statists daring shorts to play in the scary-fest of central planning! Just print you insufferable Keynesian wannabe's, hasn't Krugman taught you anything yet?
Statistics, fundamentals and sovereign debt mean nothing when you're a closed society.
Go for it ;-)
So much for "space counterfeiting."
We had very high hopes for you Spacex!
Big Kaboom instead...
Or when you have mark to model.
"the government appeared to have lost its ability to manage the market."
Uhh, that's a contradiction in terms and says it all.
THERE ARE NO FREE MARKETS
It's only a matter of time before a similar statement is made about the Western markets. A potential future quote to wit:
"the US Fed appeared to have lost its ability to manage the market"
Easy peasy.
From this moment forward, whenever someone asks what is wrong with the economies of the world, I'm just going to pull a tiny drink umbrella out of my pocket and hold it over my head.
I'm tired of explaining the obvious to a deep sea of dunderheads. The imagery alone will have to sustain them.
To boot, those dunderheads are also the first to turn violent in times of duress. Ever see National Geographic's Blackout docu-drama?
https://www.youtube.com/watch?v=FYoXxVnTePA
I watched that in India one time. I looked around, and thought, so what?
Looks like I may be permanently relocating to Delhi, it's going to hell in the USSA.
Those Hindi rosetta stone cd's I bought are going to pay off.
My boss always wants to speak English, so he can better learn it. He has unknowingly learned a ton of southern US idioms.
Exactly, what else would you expect from those who drool.
Dunderhead(s) x duressx = violence
They tend to make for themselves noticable targets - knee-jerk reactions and all that. The clawing hands and red-rimmed eyes.
Long drink umbrellas!
Sometimes ridicule is the best policy.
Glass houses mean anything to ya ?
China just fleeced its sheep. Next up global equities.
"Man who eat many prunes get good run for money."
Woman threw herself off the top of a mall this morning after losing everything in the stock market: http://mp.weixin.qq.com/s?__biz=MzA3MTIwODUyNw%3D%3D&mid=208171595&idx=1...
That link is all in chinaman speak.
her name was Wobet Paushun
So sad...
=' (
Look like the law of Gravity give the same effect no matter if it's a stock chart or mass-body...
More to come
Wow
At least they shoot some of their financial criminals.
Free Corzine!
I gave you a +.
But still, how long until the US does the same?
Who defines financial crimes?
Who prosecutes financial crimes?
Who judges financial crimes?
Who punishes financial crimes?
On another note, Obamacare was upheld recently.
Got that, "Oh shit" feeling yet?
Sellers of stock will be subject to summary execution. There. Fixed it.
They've got some spots left downrange in North Korea. You know, where they "test" those anti-aircraft guns on certain undesireables.
Gee. At least they're lucky enough to get a market correction. The US market is so overscrewed with every type of rig possible, when the US correction comes it will make the Chinese correction look like amateur hour.
Chinese correction is consolidation.
US crash is destruction.
Yes, envy is correct emotion.
US crash will be a buying opportunity.
If it ever happens.
And......Its gone.
Didn't even hardly sniff the Fib retrace.
C
China needs to control media like US, stocks will keep going up, and keep government looking good....like CNBC and Obama...
C
China needs to control media like US, stocks will keep going up, and keep government looking good....like CNBC and Obama...
BBBUT China was gunna bail out Greece!?!?!??!
PAY DEARLY FOR FLEECING THE AVERAGE SERF???
Dont think so That is the Chinese way. Speak to the average Chinese person ...their salaries kept artficially low so the gangsters families can keep it all themselves .
This stock market was set up for a once in a lifetime fleecing of the savings of the common folk.
OK OK, so does the US...but not to the same extent and we at least can read about it!
I think you misunderstand the Chinese people. They are quite the same as Indians. everyone stay poor only to avoid being targeted for theft, murder, kidnapping etc. By being poor they actually live a better safer happier life.
The west have still yet to learn all this. They continue spending more and more on defence and security only to have less and less freedom, security and very soon food too.
The Chinese and Indians have already seen it all and are happier to live a simple life. The leaders of this people may have a lot of money hidden under the bed. But they sure cannot live in extravagent palaces like US and European politicians do.
The Kings of India are living in castles but goes around begging. The Kings of China are all sweeping roads as part of their education. and Those who steal from State coffers and live wealthy life in US or Europe better not return to China as they are shot dead.
"the government appeared to have lost its ability to manage the market."
I don't understand. I thought Markets are supposed to be Free markets.
When did Government become responsible for market performance?
Oh.... yeah when Bernanke said so, and started using Government money to bail out the wall street.
What's interesting about this continuing drop is that it is happening in the face of orders from Beijing to NOT EXERCISE margin calls.
Two thoughts:
1) People are selling despite the lack of forced margin liquidations. Not good for the trend.
2) People are being allowed to margin up their accounts with no downside risk (supposedly) due to the forebearance on margin calls. Contrary to last week's position discouraging margin trading, this is practically begging everyone to TRADE MORE on margin. When this breaks out (and it will) the carnage will be colossal.
The Royal Bank of Australia is making a very wrong decision.
They're manipulating excess reserves, as oppposed to lowering rates.
The RBA is the last bastian of integrity. Tony Abbott understands the dynamics.
Hedge Funds for Dummies
Okay, lets move over to a new fancy. Hypothetically you're buying risk. (gbp/usd) and you want to hedge that risk?
Would you buy moar risk, or the spread in treasury notes?
I'd buy calls in Cable because I trade currencies.
"for months, state-owned media have issued daily commentaries to encourage people to load up on shares."
They get CNBC in China now?
this is an easy one, Goldman and JP Morgan are in China to short Chinese stocks..... why is this a surprise to anyone???
If they prop up US markets they can certainly short Chinese markets, Russian too
Russian? The Russian stock market is doing OK. And anyway the Russian government does not encourage people to buy shares and most of them dont. And if some richer folks in Russia lost money in the stock market, most people would not care. Actually, Russia is one of the very few economies, which work according to the ancient model: dont borrow money, save:-) And because of some troubles with the ruble in the past, people mostly save in property and gold (not in fiat currencies or shares). Thats why they cant crash, you cant crash without debts. How simple, isnt it?
late last year
You are mostly right except about the Gold part.
Russians often say, they don't believe in gold as there was a time when barons had gold but nothing to eat. So if they hoard anything, the first priority is frozen or dried food. And a lot of wood too in their backyard.
Oh, and also delicious and sour pickles.
According to the story, barons were robbed of all land by Communist Government for collective farming. And the barons could not buy food with gold.
1.357 billion Chinamen might be wrong.
Hmmm sucker hundreds of millions of people into the world's largest ponzi scheme then bankrupt all of them. I'm sure that won't lead to any violent revolutions.
They used to subjugate the Chinese with opium.
Now they subjugate the Chinese with fiat currency.
What's in store next?
Opium ice cream stands.
Get them while they're young.
Planned. The Wall Steet/US takes down the chinese economy.
This borrowing by the general public in order to invest in stocks and units provoked 1929, and as recently in the Cyprus stock market and invariably ends badly as retail investors will always buy at the top of the market. Yeah some people will get burnt but that's part of having a mature domestic saving and investment base. Its no different to domestic investors buying into any bubble, such as property in the US, UK and Canada (And Australia). Eventually there will be a correction and that's all we're seeing here. A fool and his money are easily parted.
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.
Blowing bubbles and manipulation desperately seeking income retail mom and pap investors, in severely slowing down economy without much of social safety net, is very disappointing and pathetic move to shore up remnants of public supports for their rule.
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 unfortunately China, having opportunity to trace her own unique road to development, began to depart from their Confucian historical perspective toward short-term shallow political game of the declining west. The greed of China’s ruling elites is sowing their own demise as much as American ruling elite did.
EXCELLENT post!
Empty political rhetoric.. The PBOC is trhe core of China's communism. Yes, heads will roll and the people on the bottom will still be there, but the core of the problem is the market and the failure of government to regulare it, thus the self regulation is taking place, flashes and crashes and that is because the economy is now stuck on luxury goods as the 'preformance targets'.
Basic study of macro economics tells us that regulation at the top and the bottom is required for stability. Sometimes it is good to let the 'system' take the 'wild ride'. For most people, history has to repeat it self.
As for those on the bottom, the real question is are they getting a better quality of life, living longer, suffering less, it is not about the relative money, it is about working 10 hours a day instead of 14 and being able get get clean at the end of the day and not have lice and maggots in one's rice.
Your failure was to beable to read the entire article. Chinese banks are doing well, thus communism will surive and take back control... and think of the US FED as a type of communism, just more flawed at this time (because the US is a very BIG DEBTOR nation).
Suck on that...
Man, you have no idea what communism is. Read a book. Chinese system in not a communism under any reasonable criteria, they even removed from the party platform leading role of workers in the governing of the country. They laid off millions of workers, closed thousands of factories that provided their political base. It is deteriorated to fascism infused state and corporate oligarchy. Learn something before you utter such nonsense.
That tank in tiananmen square didn't stop this time !.
The avaerage chinese small investor isn't loaded up with the 'savy BS' that the US investor has come to rely on and now they are realizing that the market is a geal gamble. It s better now than later and the carnage will settle when institutional accounts that manage more long term investments, like retirement accounts buy up what is good at great savings. The chinese will start applying the first rule of stocks; if it don't have a dividend, it's a total gamble.. and don't buy unless you have the ability to loose that money.
Long namecoin!