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Panic: China Central Bank Steps In To Bailout Stocks As Underwater Traders Pray For A Rebound
China’s equity miracle — the one bright spot that has so far served to distract the masses from rapidly decelerating economic growth and a bursting real estate bubble — is in deep trouble.
A dramatic unwind in unofficial margin lending channels such as umbrella trusts and structured funds which have together served to pump some CNY1 trillion into a market that was already red-hot, sparked and perpetuated a 30% decline in the space of just three weeks, pushing Beijing into panic mode and prompting simultaneous policy rate cuts along with a variety of other measures designed to stop the bleeding.
On Saturday we learned that a consortium of Chinese brokers will inject 15% of their net assets — or around $19 billion — into blue chip stocks starting Monday and China’s mutual funds have pledged not to sell their equity positions for at least a year.
As we and others noted, the injection from the brokerages likely will not matter. As one analyst told Bloomberg, “it won’t last an hour in this market.” Besides, much of the unofficial, backdoor margin buying was funneled into speculative small caps, which are, for now anyway, outside the purvey of the emergency measures. For these reasons (and others) we said the following:
It's probably just a matter of time before the PBoC intervenes to provide Kuroda-style plunge protection when "sentiment" looks to be souring.
It took less than 24 hours for that prediction to be proven correct because on Sunday, the China Securities Regulatory Commission announced that the PBoC is set to inject capital into China Securities Finance Corp which will use the funds to help brokerages expand their businesses and reinvigorate stocks. Here is the confirmation from the People's Daily:
Breaking: #CSRC announced Sunday night China's Central Bank will offer "liquidity support" to stabilize stock market. pic.twitter.com/bftmRXXvSd
— People's Daily,China (@PDChina) July 5, 2015
And here is the WSJ:
China’s central bank will provide liquidity to help stabilize the country’s crumbling stock market, according to a statement by China’s top securities regulator late Sunday.
The People’s Bank of China will inject capital into China Securities Finance Corp., which is owned by the securities regulator, according to the statement by the China Securities Regulatory Commission. The company will then use the funds to expand brokerages’ business of financing investors’ stock purchases.
The CSRC said Friday it would dramatically increase the company’s capital to 100 billion yuan ($16.1 billion) from the current 24 billion yuan. The exact amount to come from the central bank hasn’t been disclosed.
The latest move comes as Chinese authorities are scrambling to stem a stock-market slide that officials fear could spread to other parts of the world’s second-largest economy.
Also late Sunday, a unit of China’s giant sovereign-wealth fund, Central Huijin, said it recently purchased exchange-traded funds and will continue to do so, another measure aimed at stabilizing the market.
In other words, China’s central bank is now underwriting brokerages’ margin lending businesses; that is, the PBoC is now in the business of financing leveraged stock buying.
Despite being one step removed from onboarding equities directly onto its balance sheet, the PBoC is effectively buying stocks, which amounts (of course) to QE. What's particularly interesting here is that as we've said on too many occasions to count, it's exceedingly likely that the plan in China was to save outright QE for purchases of China's local government bonds.
The CNY15 trillion (at least) of new muni bond issuance that's part and parcel of the country's critical local government debt refi program will likely put quite a bit of upward pressure on rates which will make benchmark lending rate cuts less effective, eventually necessitating outright purchases by the PBoC. Now, a very inconvenient stock market rout may have just pushed Beijing into QE far sooner (and in a different market) than it would have liked. But as noted above, China has no choice. The effect of an outright stock market collapse on domestic morale would be devastating and might very well serve to undermine international confidence in the country's equity markets just when momentum was building for MSCI benchmark inclusion.
We'll close with our (slightly modified) warning from Saturday which seems particularly relevant now:
"Because the reckless margin buying in China is concentrated in small caps trading at nosebleed multiples, the central bank will be funding the purchase of umbrella manufacturers, real estate developers-turned P2P lenders, and ponzi schemes unlike the BoJ's equity book which (at least as far as we know), is comprised mostly of ETFs."
"Leverage your dream", now sponsored by the PBoC.
However it may now be too late as the psychology has changed irreparably: "I didn't sell at the peak because people all say the market will rise beyond 6,000 points," Shao Qinglong, a public service worker who has already lost over a quarter of his capital investing in stocks, told Reuters all he is waiting for is for the market to recover enough for him to break even. "I'm now waiting for the market to rebound so that I can get out."
Good luck.
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another ZH prediction comes true
TRUE DAT
So it seems like in general financial market manipulation is considered wrong, and if you point out evidence of clear manipulation your accused of being a conspiracy theorist, but when a central bank manipulates markets its considered business as usual. The world will soon realize this is the most damaging form of manipulation.
Still reacting.
Where is the decisive countermove on the global financial chessboard?
Because it's worked so well for Japan...,
Oh, wait.
Oh well, at least China still has $4.5 Trillion in reserves (Probably not including as yet undeclared Gold Reserves) as opposed to some other countries with $18+ Trillion Debt and another $200 Trillion Off Balance Sheet?
"I am waiting for the market to go up so I can break even"
What an investing death trap....
jb
"I'm from the government and I'm here to help."
Now it gets really weird with a Chinese fire drill in the stock market.
I always wondered what a Chinese shit sounded like...
gotta admit
this is faster and stronger than I've been saying here... still sort of what I've said they would DO but the speed and strength by which they did it means I was wrong by how much I thought they CARED to do... though the impact on stocks is also what I thought they would try to DO... just enough to 'soften' the landing (based on the impact)
but the intent based on its strength and speed suggests they really want to not just soften but recover the large correction, and if that does occur... I didn't expect that. I'm thinking sort of about a soft 3500-4000 landing where stocks sort of bounce around here while more people reconsider real estate again
but based on the strength and speed of these liqduity and regulation changes, if the market goes back to 5000... then PBOC is crazy even by usual disagree-with-ZHers/pro-China-market/pro-PBOC sentinment lol if they do this to push the market back to 5000 then they truly are on par with western feds :P
That $4.5 trillion belongs to the central government. Total debt of corporations and local governments is over $30 trillion. I doubt that will blow that entire wad to prop up the stock market and let the government collapse.
This game only works as long as the CTRL ALT PRINT Button works. Propping up these stawk' and real estate markets is going to lead to a currency crisis. That's when the button stops working!
I just dropped my guts , it fucking stinks ! Does that count ?
So the question is, does the usa gov REALLY want failure of the chinese markets? Paul c roberts would have you think so. Only, wont this bring contagion to usa markets? ZH would have you think so. So nobody wins!?! Could use some clarity right about now...
Two wongs dont make a white... Zing!
command economy, stand staight soldier. goose step forward as told, or u shall be branded for life a traitor of the dictate. yes, SIR. BEND OVER NOW, and pay the price for tuesday thoughts...
that could take long time. Bigger bubble here we come;)
So the Chinese are going to "heal" the gold and silver market with physical. Dream on.
If you do not buy that, by default; you must believe the fed holds gold and silver as, well, tradition! Derpity derp
So the Chinese are going to "heal"the gold & silver market with physical? Dream on. They like to play the paper game as mch as the West.
One Chinese banker today asked for the government to step in and save the economy with real money; silver and gold. I noted that he mentioned silver first.
The gov would be crazy to waste its gold in propping-up a fake market, under attack from both foreign (some boyz with "the company" ?) and domestic speculators. Use some liquidity to burn the worst offenders, and the others will start learning soon. Some public executions would greatly enhance the effect of that...
Some broker reckons this is a winner on the JSE......
https://www.youtube.com/watch?v=AlNTu32KQU4
Everything is relative
Let's get this straight - the PBOC ponzi is going to save a bunch of small cap ponzis. Everything is awesome!
Let's get this straight - the PBOC ponzi is going to save a bunch of small cap ponzis. Everything is awesome!
Seems more likely that the connected assholes got out in time (on Insider info), but the others didn't. Same as always.
Ah, but... Who but Trolls and sarcastic guys like MDB could have foreseen that it would be China and the Peripheral/Developing Economies that would be in turmoil, rather than the US?
I certainly did not expect that, given all the ZH articles and posts to the contrary. So, it looks like we have another false bet, that underscores the adage: The Fed can stay solvent longer than you can. Or China can.
Change their business cards man
https://www.youtube.com/watch?v=gWS_Mh7WhT0
I for one have continuously maintained that China is in a far more precarious position than most people suppose. This is and was based on a simple examination of the aisles in any large American retailer.
"Made in China" stickers are an absolute kiss of death now. It is amazing to witness the lengths to which companies are going to in order to hide an admission of Chinese country of origin.
As a result, it has long been apparent to me that China was already at its point of apogee and on its way back down. Claims of 7 percent growth have been rigorously enforced by the Chinese government. Anybody who comes in with a number > -.1% of the current official figure loses their visas and any further access to the internal Chinese markets. Upside predictions are of course welcome at any level of imagination.
If the EU is in recession, the US is flat, Latin America is in financial turmoil, Africa is of no major weight, Japan is crashing, and China is filled with ghost cities, then where is that 7 % growth coming from? Answer: nowhere.
But this leads to an interesting follow-up question.
If China's real estate market is over-saturated, its industry is way overbuilt, and its stock market is about to finally achieve the Chinese goal of beating America in something (in this case the mother of all crashes), then where can the next Chinese bubble come from?
Central planning is about to reach a spectacular climax in the land of the Dragon.
what most people have not realized yet is the yuan is .gov money, not private money like in the west. the interest rates on chinese money is for show. the pboc(china.gov) is able to fill any hole in the economy with fresh fiat to replace destroyed fiat. the pboc is truly the printer of every resort, not just the last resort. there is no fed and private banking system to rip the chinese people off. they will ripoff any foreigner if they have to. if you owe money to yourself you owe no money.
That hot money is now creating ghost mansions around the world... It's not over. The maintenance and taxation erosion will eventually stop this madness.
exactly. now, when china sneezes the world gets pneumonia.
i recall another country used to have that distinction...............
BS - It's hard to find anything not made in China these days. Nearly all smart phones and electronics are made in China. They might be assembled somewhere else, but the parts are made in China. Maybe the wealthiest 5% can keep some Chinese products out of their homes, but 95% of us cannot. Take a look at the back of your TV, computer, phone and whatever else.
Silk road that! i.e. say hello to real-economy constraints, as opposed to swimming in credit addiction, pretending to be the real economy.
What real economy constraints are you talking about ? This is about their stock market, which is as fictitious as ours. At least the Chinese have the excuse of being officialy a commie country. What's ours ?
The Fed can stay solvent longer than you can. Or China can.
I'm the first one to point out that while the FED is not omnipotent. But the Money Masters of The Tribe have been playing this game forever. The idea that somehow the corrupt to the core ChiComs were going to out maneuver the FED for economic hegemony was laughable. A totalitarian state billion peasants and a million oligarchs of differing levels is great for getting a manufacturing economy going in no time. Not so good for keeping control when TSHTF and all the disparate interests run to cover their own ass.
Let's see how well the Chinese QE works when the FED raises rates in September. Chinese exports are down as it is and I suspect an increased cost of money in the US and continued stagnation in Europe won't help. China is looking quite analogous to Japan of the late 1980's. Outside of being a little further ahead on securing natural resources, they are facing the same demographic and manufacturing and currency issues. And at least Japan hadn't poisoned their environment...
Weaker Yuan + stronger USD means cheaper Chinese products. That should help their exports.
But that doesn't happen in a vacuum. Is there any evidence that Japanese, European or American consumers will buy more shit just because it's a little cheaper? Sure didn't happen with gas consumption... Weak Yuan = Weak Yen as far as it's ability to boost domestic production. It failed in Japan and will fail in China. Currency devaluation has only ever served to protect the asset class from insolvency by taxing consumers.
Shanghai Stock exchange as of today is 79.03% up from where it was on July 4, 2014 in 1 year. While it is down 28.8% from its peak achieved on Jun 12, 2015.
Why is it that ZH can predict the doom and gloom and all the declines which is barely 28.8% and never the upside which is much ...much higher of 79% and whoever sold the index at 5,000 was 142% up in 1 year?
They do! You just need to buy as soon as they mention the word lehman, panic, implode, ect.. But if you have stuck to the ZH concensus and short yen, you would be solid right now... Thats the big trade
I do agree however few sold and most bought high. The smart money, those tied to the manipulation, may have made money here. Joe Blow lost again. Imagine what things will look like there when it gets bad.
ZH is rarely right. The reason you read ZH is not for its accuracy, but because ZH provides a useful counterpoint to the bullshit that the MSM and MSFM spouts that is when true, not useful, and when useful, not true. You evaluate ZH in the context of MSM / MSFM reports, and combine the two to provide something that's hopefully of greater use than MSM / MSFM idiocy.
I.e, if they were going on about the Chinese bubble here, they got the timing all wrong and there would have been a good 50% (as I made) to make before the bubble crashed. I, along with a ton of others, have been calling the failure of Abenomics, but it's taken until this year until Abe Shinzo's been forced to face serious political headwinds. And Tesla, despite the huge bear sentiment, has been rising like crazy for now; it may collapse later when it's obvious that its revenues are overstated and that Elon Musk is literally a used car salesman, but now is not the time.
"Why mi do go lo?" - Sum Ting Wong
OT: Citi/JPM corners Precious Metals markets
aka Corzine Economics
Heads they win...tails they win
Losses transferred to American taxpayers.
Politicians have a very low pain level. Let it crash as orderly as possible. Best thing that could happen.
LOL. Good luck with that.
Here comes another 6% bump quickly followed by a 10% decline
Your numbers are CORRECT. These are simply halfway back trades...down "ten" and then retracements UP "5" in round numbers....you can see it on the charts. I am an expert and trade these moves daily.
Halt the 1:4 and 1:5 margin buying and problem will be solved.
Easy come easy go.
Get on board the Deflation Ride to Hell, please sit next to Japan.
and somebody wake up Hicks!
I've got a bad feeling about this drop!
We're 5x5, in the pipe.
Oh..wait.
Not a good time .... for my Spratly Island Vacations .... IPO roll out ?
LONG Jicheng Umbrella Holdings Ltd.!
No problem...BTF Chinese stocks. Can't go (wrong).. I mean (yuan).
Well, at least the Chinese admit it. The FED sneaks around using proxies and middle men to launder the money into the stock market and then pretends the DOW is proof positive that Keynesian money dumping by the FOMC wise men is working.
You've echoed my thinking on the matter. The U. S. just adorns the mess in a dress and lipstick. It's still the same old pig. The Chinese are simply less adept at this sort of "sophisticated" sleight of hand. See? The U. S. does have more experience at this so the methods are more subtle.
… sounds like it’s time for a
Greek Referendum:
The skeptic is me kind of always believed the globalist would never have put China in power without a way to take them down.
.....and as a result, the crafty anglo-saxon banksters keep the CNY out of the world basket of currencies, thus maintaining petrodollar supremacy.
Yep, thank God for Belgium.
Why is it that Belgium has 1 trllion debt and noone cares?
If everyone else has a President's Working Group on Financial Markets, then why shouldn't they?
Executive Order 12631--Working Group on Financial Markets -
http://www.archives.gov/federal-register/codification/executive-order/12...
"If everyone else has a President's Working Group on Financial Markets, then why shouldn't they?
Executive Order 12631--Working Group on Financial Markets"
No reason they shouldn't. However, it doesn't change the laws of math about bubbles. 100% burst and deflate.
Executive Order 12631 didn't prevent the Nasdaq from collapsing 76% in 2000-2002.
BTW this is WAY different than what the Fed did. Mainly for two reasons, the federal reseve is private. The Chinese gov is just that the gov. Second the US bought bonds, not stocks.
Sorry I forgot about GM....
Lol the PBoC is operated by the government. GS and JPM have banking arms everywhere. The PBoC is not by the people and for the people, it is by the rich and for the wealthy Chinese.
I thought in all places I wouldn't have ot end my statement with <sarc> here @ zerohedge
We'll make our last stand at the Citadel.
Just amend that to 'last stands' (plural) and 'at Citadel', non-proper.
Actually learning from the US... if I wanted to make a hell of a profit, can someone figure out which stocks the Chinese Gov is buying? It'll never go down
You can do anything in a dream.
What isn't, is.
So all is well!
This Shanghai live futures chart will soon show whether the PboC-broker PPT injection will last 1 hour, 5 minutes, or perhaps be DOA:
http://www.investing.com/indices/shanghai-composite-advanced-chart
Centralized "planning". Didn't work out so well for the farmers. Lessons from the past? What past? What history? Free market, dead ahead!
HUH?? SO LETS DO THE MATH HERE. THEY ARE INJECTING 74 BILLION YUAN [$11.1 BILLION] TO CAPITAL. IF THEY LEVERAGE UP THIS CAPITAL BY A FACTOR OF 10 - THAT IS STILL ONLY [$100 BILLION USD]. THEY WILL MAKE IT MORE EASY FOR ACCOUNT MARGIN - BUT THERE HAS TO BE ACCOUNT MARGIN "TAKERS". HOW IS THIS QE? ZIRP MUST BE IN PLACE FIRST BEFORE QE. WHERE IS THERE EVIDENCE OF ZIRP?
Its peeing on a forest fire. If PBoC wants to play big boy world power, throw in the pinkslips and lets have a real drag race. Building a sand island somewhere aint world power stuff.
But they are sooo new to this anglo game, so i expect they will get pwned by Lloyd of "Golden Sack"
"ZIRP MUST BE IN PLACE FIRST BEFORE QE."
Is that the long forgotten eleventh commandment?
I mean, rearry?
"China Central Bank Steps In To Bailout Stocks"
The new norm...What market participants have come to expect. Same here in the good 'ol USSA!
Jack and the boyz won't allow the DOW to correct either!
This system is twisted beyond belief, and it will get much worse!
BTFD. Banksters are going to print themselves up a bundle.
No kidding. Not bad news at all.
This is the role of Central Banks now, equity bubble manufacturing.
What could possibly go wrong?
China is fucked. Fucked big time. The blow the bubble so big... and there is no way to stop it from bursting. All these individual investors are leveraging 5x on stocks that worths nothing. And I heard even companies or corporations are borrowing money to "gamble" in the stock market. If that is the case, more companies will shut and more unemployment come. Let alone all the millions of civilians are losing all their money.
Revolution is coming.
Communism and Islam are two worst things mankind has ever invented...
Buuuuuuuuuuuuuuuuuzzzzzzzzzzzz, politicians and bankers are the two worst things mankind ever invented.
Now the communist have become totally fucking retard too.
The financial and investment worlds have become totally and completely fucked.
Hahahahahahahahahahahahahahhahahahahahahahahahaha tick tock
That is all
The Chinese are excellent at copying shit. Now they just copied our own Plunge Protection Team tactics. Bravo for China!!
Yes, but like most stuff copied by China, it fails even sooner!
"Panic: China Central Bank Steps In To Bailout Stocks As Underwater Traders Pray For A Rebound"
At some point in a bubble, a rebound becomes nothing more than a dead cat bounce.
These things always end the same way, as math is an absolute.
Aren’t the People the ones behind the Peoples Bank? In which case, PBoC purchases are no different than giving people money to buy more stock.
Why mess around, why don’t they all just agree tomorrow that every stock price is twice what it was yesterday. Oh, and most importantly, anyone who sells goes to jail.
Sometimes I wonder if our system is just destined for failure, or if it's the idiots in charge that are the cause of it's failure. Who knows, maybe this story of never-ending growth and basing everything on it was a stupid idea to begin with. Well, except for those like Hillary who prey on the stupidity of others to keep in power and be filthy rich. Same as it ever was I guess.
Funny how China runs into trouble when the EU is in the shitter. you got to wonder is it being controlled. The timing is amazing Russia kind of out of the way China put under pressure right at the time EURIP looks like it could fold
They will buy 600028.ss 601857.ss 601398.ss 600050.ss and good luck.
Bearish for gold in our CB parallel unicorniverse.
Sum Ting Wong
it is called "panic" when the pboc does it. it is called business as usual when the fed does it.
the sheer volume of the NYSE and direct foreign investment, allows the fed to leverage this volume with a much smaller intervention. if theres a myth about the feds power its the myth that their money printing will overwhelm panic selling. it wont in all instances, but the pboc doesnt have that kind of leverage.
These governments have all lost it. Official Policy has now become to encourage and foster asset bubbles and then intervene massively if they start to deflate even by a small amount.
Guaranteed capital misallocation on a global scale which impairs long term growth and prosperity.
China’s [America's] equity miracle — the one bright spot that has so far served to distract the masses from rapidly decelerating economic growth and a bursting real estate bubble — is in deep trouble.
America's equity miracle at a time of peak debt, peak money printing and peak unemployment is the one bright spot to distract the masses.
Central Banks across the globe now equate Equity Share Price Values with Real Wealth Creative Economic Activity. It is not! Real wealth must be created in the factories, on the farms, in the mines, inside the Tech companies, in small business across America. The take a cetrain amount of investment capital in, add labor and resources, then spit out wealth. The markets should price this at it's proper level through price discovery by investors seeking gain.
But NO, The Bankers have another game. In which financial engineering is the economic driver. In which manipulation and money printing juice share prices, and THIS is supporsed to drive the economies.
It's fucked up! It will end badly! It benefits the 1% who skim all the wealth, while the productive economy is neglected and starved of investment capital, and it's all wrongly priced by the fake markets. It's fucked up! It is ending badly!
Yup. Printing money and falsifying interest rates destroys jobs and value over the long-term. Real work , innovation and fewer government restrictions on businesses creates value.
Seems like Transparency could be the antidote that keeps hubris in check in the markets.
IF we had simplified, Streamlined, Standardized, and Transparent Accounting, GAAP Rules, Financial Reports, Financial Instruments, Financial Ratings (Including rating on Admin Costs by percent & billions of dollars, comparables to other players in the industry, overhead costs, executive compensation, flow of options, dividends, compensation to insiders... to keep in check looting of corporate revenues and assets in return for more debt)...
Well then maybe it would be a straight game not executives gaming the investors & government.
What we can't have Transparency for Public Corporations?
The Chosenite media is bashing China for this (if they mention it at all) while ignoring the actions of the Chosenite FED.....typical
Bullish!
Perhaps the teeming mass that is China is just too huge and unmanageable in the long run. This experiment with western capitalism is but a blip on their cultural timeline. That the default existinence for them is knee-deep in a stinking rice paddy, at the mercy of floods, famine and warlordism.
As it has been, so it shall be.
Prayer is not a good trading plan
Nothing another cultural revolution cant fix.
the American Zionists are doing this to the chinese stock market, get rid of them now.
...while we are looking at Greece and talking about "Contagion"...This crash in the Chinese stock market is enormous and ongoing. Greece is nothing in comparison to this. Will Chinese housing investors need to liquidate US Realestate now? Will that be one of the next dominoes leading to a 2008 type crash?
Are we in the midst of the "Great Fourth of July Economic Implosion of 2015"...or is this just a sparkler? How do we know and who the hell is going to tell us??
Can the CHINA CB back stop such a large and ongoing catastrophe? How? They already have a debt to GDP ratio of more than 8:1 ! Won't creditors inside and outside of China start calling in their loans?
The USA FED could get away with pumping a $Trillion into the system because the USA has enormous assets. China? Not so much. Chinese investors are climbing over each other to get the fuck out. When the rest of the world becomes aware of this, BOOOOM! Right? How long will that take to unravel? When does the other shoe drop as in 2008??
Bigger question: If bad debt is allowed to be white-washed by Central Bank fiat, when does the investing public cry "Foul!"? When does it become toxic? When do people start realizing the game is rigged and unsustainable? Today? How does a investor react to the realization that most of their portfolio exists only in the Matrix? Don't they then turn to commodities, Gold, ...even more realestate purchases?
Was just thinking NSA & CIA would have thought about the National Risks to the US Commodity, Bond, and Equity Markets (Exchanges)... and wondered if they could drive foreign investors in to the US Equities as LIRP Ended.
An Intelligence Operation to cripple the Chinese Stock Markets with fear after exposing or creating some systemic weakness.
Don't say it is not an Obvious Idea.
Since I don't know anything about Chinese or American Market Exchanges or the details of the systems I'm not sure it would be planned against the Architecture.
- Maybe a strategy would be to spread rumors of Architecture problems
- Chinese Markets have always been heady, like played by Gamblers, this was always a weakness
- Home Grown Chinese Stock Exchanges would be convenient for Chinese to participate in and be in their standard language, plus there is community support & discussion to make education easy
- Fear is always the best Propaganda & Business Angle
This Chinese Crash was always going to happen, but how can USA pull these investors into US Markets?
When your banana guy and dry cleaning lady are telling you about the latest "hot stock tip", you know the market is over inflated.