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In China, Hairdresser Bull Call Goes Horribly Wrong, Broker IPO Crashes 31%

Tyler Durden's picture




 

Around two weeks ago, Wang Weidong, who WSJ describes as “one of China’s top fund managers,” drew a crowd so large at the Grand Hyatt in Lujiazui that the building’s air conditioning unit was, much like the SHCOMP’s volume tracking software in April, overwhelmed by the sheer number of aspiring Chinese day traders in attendance.

The message was clear: buy Chinese stocks.

“The 4000 level was only the beginning of the bull market,” Wang said, implicitly suggesting that the greater fool theory of investing is the way to go if you’re trading on the SHCOMP or the Shenzhen. Wang even went so far as to suggest that anyone who chose to take a vacation instead of spending their holidays day trading was making a big mistake. “They say the world is too big and I need to go and take a look. I would say, the stock market is hot, so how can I leave it behind?” he asked.

Anyone who took that advice — and you can bet quite a few of the 600 attendees did — was in for a rude awakening.

Chinese stocks have suffered a brutal sell-off over the past three weeks as a massive unwind in the shadowy world of backdoor margin lending has overwhelmed official efforts to stop the bleeding and indeed, even a weekend move by the PBoC to pledge central bank support for increased margin lending (and yes, that is as ludicrous as it sounds) wasn’t enough to stabilize the market as evidenced by the SHCOMP’s wild ride on Monday.

Here’s WSJ with more on why your hairdresser won’t always be right when it comes to identifying attractive entry points.

On a hot, humid Sunday afternoon in mid-June, around 600 eager stock investors packed the largest ballroom at the Grand Hyatt in Lujiazui, Shanghai’s equivalent of Wall Street.

 

With Chinese stocks at a seven-year high, the investors had gathered to listen to a talk by one of China’s top fund managers, Wang Weidong, of Adding Investment. The crowd was so large, the air conditioning couldn’t keep up and hotel staffers brought in chairs and bottled water for the sweaty participants.

 

Today the Shanghai index and smaller, more-volatile indexes in Shenzhen are off more than a quarter from highs reached in June.

 

Even after the peak, new investors opened millions of brokerage accounts so they could play the rally. Sophie Wang, a 32-year-old college art teacher in Nanjing, said in a recent interview that she opened her first stock trading account two weeks ago and bought some shares on “the advice of my hairdresser.”

 


 

Ms. Wang said her holdings are down 32%. “I don’t really follow news on stocks that closely. My hairdresser said it was still a bull market and I needed to get in,” she said. 

 

She said she didn’t know what to do when the market started falling and she is still holding her shares.

 

The government has shown increasing concern about the selloff, but its efforts, including an interest-rate cut, have failed to stem the slide. On Saturday, Beijing took its most-decisive action yet, suspending initial public offerings and establishing a market-stabilization fund to spur stock purchases. The Chinese central bank also pledged to provide funding to support brokerages’ margin finance operations that allow investors to borrow cash to buy stocks.

 

China has suspended IPOs before in hopes of boosting the market by way of cutting supply. This time, the stakes are higher because an estimated four trillion yuan ($645 billion) worth of IPOs was in the works, and Beijing had hoped to use a buoyant stock market to help heavily indebted companies raise cash.

Speaking of IPOs, it appears as though brokers are just as ineffective at propping up their own shares as they are at providing plunge protection for the broader market, because as the following from Bloomberg makes clear, Guolian Securities' debut did not go as planned

Chinese brokerage Guolian Securities Co.’s shares tumbled in the worst major Hong Kong trading debut since 2011, even after China rolled out emergency measures to stabilize the nation’s stock market.

 

Guolian closed 31 percent lower than its offer price at HK$5.51. 

 

Guolian’s debut was the worst since 2011 for any Hong Kong initial share sale of at least $100 million, Bloomberg-compiled data show. While the securities firm’s shares were in part catching up with market declines since the stock was priced on June 26, investors are concerned that the Chinese slump isn’t over, Castor Pang, head of research at Core Pacific Yamaichi in Hong Kong, said by phone.

Where we go from here is anyone's guess because as we noted on Sunday evening, retail investor psychology has now suffered irreparable damage, meaning panicked hairdressers and banana vendors looking to sell the rips will be battling the PBoC for control of an insanely volatile market.

In short, expect the wild swings investors have seen over the course of the last two months to continue and indeed to become even more exaggerated as the battle between Politburo plunge protection and frantic farmer selling heats up.

 

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Mon, 07/06/2015 - 20:34 | 6278392 El Oregonian
El Oregonian's picture

Must feel like a rump roast about now.

And well done...

 

Mon, 07/06/2015 - 20:53 | 6278465 Manthong
Manthong's picture

“a weekend move by the PBoC to pledge central bank support for increased margin lending”

If only the Fed had done that in 1929 everything would have been fixed.

Mon, 07/06/2015 - 21:03 | 6278490 Squid-puppets a...
Squid-puppets a-go-go's picture

Confucious say, chinese hairdresser still more cred than Jim Cramer

Mon, 07/06/2015 - 21:15 | 6278522 JethroBodien
JethroBodien's picture

I understand the hairdressers name was "som ding wong"

Mon, 07/06/2015 - 21:29 | 6278566 Stackers
Stackers's picture

Progress !!!

Next up New Guinea cannibal hill tribes !

Mon, 07/06/2015 - 20:33 | 6278393 q99x2
q99x2's picture

Sad thing is that some hairdresser probably once said the same thing about FB

Mon, 07/06/2015 - 20:49 | 6278451 Antifaschistische
Antifaschistische's picture

nothing makes me an expert...but I've been to China numerous times.  I have many Chinese friends and business associates.   What I do understand is that most of them do not trust each other...they don't place a high value on contracts and agreements, and they always believe someone 'on the street' is really trying to rip them off. (the reality I have no opinion about)

So....if you don't trust the guy on the street, whose eyes you can look into...how in the hell do you trust giving your money to a broker, to pass along to a company...you have no knowledge of and no understanding of.  This truly puzzles me.

Mon, 07/06/2015 - 20:59 | 6278480 booboo
booboo's picture

Herd mentality, it's a human trait.

Mon, 07/06/2015 - 21:13 | 6278520 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

chinese people are the ultimate sheeple. i live in beijing, been in china for 5 years, speak the language.

 

instructive anecdote: i go to a massage parlor twice a week, massages cost 50RMB (roughly $8) for an hour. everyone is in a big room and all the massueses talk to each other. up until 3 weeks ago, for months all they would talk about was their stock picks. these people work 10 hours a day, for 15 RMB/hour ($2.50), giving massages and they put all their extra money into the market. this week not a single mention of stocks when i was there.

by the way, the chinese translation for "invest in the stock market" is "play stocks", or "fry stocks" (wan gu piao/chao gu piao). also instructive.

Mon, 07/06/2015 - 21:33 | 6278580 Government need...
Government needs you to pay taxes's picture

Are we talking deep tissue, or rub'n'tug?

Mon, 07/06/2015 - 21:49 | 6278636 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

deep tissue. the rub and tug place is next door and is more pricey.

Mon, 07/06/2015 - 21:37 | 6278590 ConManipulation
ConManipulation's picture

I have heard that they call it "play", like it's a casino game.  This man is on the know.

Mon, 07/06/2015 - 21:37 | 6278591 ConManipulation
ConManipulation's picture

I have heard that they call it "play", like it's a casino game.  This man is on the know.

Mon, 07/06/2015 - 22:55 | 6278821 JuliaS
JuliaS's picture

Frying stocks? Sounds almost like giving money to a "broker".

Mon, 07/06/2015 - 23:19 | 6278876 1984
1984's picture

In Chinese, the literal meaning of "chao" is "to stir-fry".  The figurative meaning is "to speculate".  I think it derives from the act of flipping the food stuff in a wok.  So, to "stir-fry stocks" means to SPECULATE in stocks.  In the Chinese mind, the stock market is a casino.  Yet they never learn.

Mon, 07/06/2015 - 21:25 | 6278550 Bobportlandor
Bobportlandor's picture

"... they don't place a high value on contracts and agreements..."

Supreme Court dissensions comes to mind

General Motors bailout

AGI

Home Mortgage Debacle

Chicago's Bailout

Sounds to me their smarter then Me. I went way to long thinking people in charge would come to their senses.

Lawyers (.) are even more Despicable then the jokes told about them

http://www.liveleak.com/view?i=191_1436146601

 

 

 

 

 

Mon, 07/06/2015 - 20:57 | 6278475 Tanz der Lemminge
Tanz der Lemminge's picture

Should have listened to the shoe shine boy.

Mon, 07/06/2015 - 20:37 | 6278410 NoDebt
NoDebt's picture

Man, when these Chinamen made their shift from real estate to paper assets I figured it would take at least 3 years for them to go full-retard.  Wrong.

Once again, they copied a US product (the stock market bubble) in a breathtakingly short period of time compared to us.  But, not surprisingly, at a very low level of quality.  Place is coming apart like cheap sweater (made in Bangladesh).

Mon, 07/06/2015 - 20:45 | 6278440 disabledvet
disabledvet's picture

Just announce "we have printing presses and we intend to use them."

Worked GREAT over here...

Mon, 07/06/2015 - 22:59 | 6278833 InvalidID
InvalidID's picture

 

 Just like every other knock off China has produced, they even managed to fuck up the printing press...

Mon, 07/06/2015 - 21:06 | 6278489 Wild Theories
Wild Theories's picture

You mean there's a hidden moral in there? copying the west isn't always good?

 

btw, I thought "his name was nodebt"

Mon, 07/06/2015 - 21:17 | 6278523 NoDebt
NoDebt's picture

Reports of my demise are greatly exaggerated.

(I've always wanted to use that line for real.)

Mon, 07/06/2015 - 22:35 | 6278767 r00t61
r00t61's picture

I am glad to see that NoDebt is back.

Next I want to see - no debt-based money conjured out of thin air by Rothschildian lizardpeople.

Mon, 07/06/2015 - 23:32 | 6278900 NoDebt
NoDebt's picture

Wish granted.

Mon, 07/06/2015 - 20:37 | 6278413 davidalan1
davidalan1's picture

Winning........

Mon, 07/06/2015 - 20:54 | 6278466 booboo
booboo's picture

Soo, was that Wang Wie of Dong Addled Investments? It's like a damn bath house convention, more Wangs and Dongs than a Chinese Phone book

Mon, 07/06/2015 - 20:37 | 6278414 Make_Mine_A_Double
Make_Mine_A_Double's picture

Meh...my Hello Kitty Vibration Energy Gold No 1 Ever Bountiful stock is up 1500% even with factoring the recent 40% drop.

Mon, 07/06/2015 - 20:37 | 6278415 OhNo
OhNo's picture

Beans and Rice oh soo yummy.

Mon, 07/06/2015 - 20:38 | 6278416 rogerrabbithole
rogerrabbithole's picture

Som Dom fok is my broker. Says it's all good, so whatevs.

Mon, 07/06/2015 - 21:25 | 6278549 Son of Loki
Son of Loki's picture

Time out for a break:

 

Q: Heard about the new German-Chinese restaurant? A: The food is great, but an hour later, you're hungry for power. Q: How does every Chinese joke start? A: By looking over your shoulder. Q: What do you call a guy thats half Mexican and half Chinese that wears only one sneaker? A: Juan Chu

Mon, 07/06/2015 - 20:38 | 6278418 TheAntiProgressive
TheAntiProgressive's picture

Get in there and SELL!, SELL!, SELL, SELL!!!!

Mon, 07/06/2015 - 20:39 | 6278420 OhNo
OhNo's picture

Beans and Rice oh soo yummy.

Mon, 07/06/2015 - 20:45 | 6278425 fauxhammer
fauxhammer's picture

Go to a hairdresser and get a haircut.  See?  You can still get what you pay for these days.

Mon, 07/06/2015 - 22:37 | 6278772 Arnold
Arnold's picture

I am glad that quote came from a woman.

A man having a trusted hairdresser sets off gaydar alarms in every culture.

Mon, 07/06/2015 - 20:41 | 6278428 Bennie Noakes
Bennie Noakes's picture

That must have been one expensive hair appointment.

Mon, 07/06/2015 - 23:10 | 6278860 Bunga Bunga
Bunga Bunga's picture

She got really shaved.

Mon, 07/06/2015 - 20:44 | 6278438 lsd
lsd's picture

Isn't that a WSJ article?

Mon, 07/06/2015 - 20:46 | 6278444 Bull Bear Nice Pair
Bull Bear Nice Pair's picture

4.85% interest to cut, $21 trillion domestic deposits to tap in, value of stocks ($7 trillion) still 20% higher than Jan 2015 ($5.7 trillion), no big deal

Mon, 07/06/2015 - 21:28 | 6278556 Son of Loki
Son of Loki's picture

1.3 billion people most of whom are very hard working and who want to live like Americans or at least like Australians or Canadians.

 

I have to agree their market will go higher. Maybe not fast but definitely higher. However, they need to control 1) corruption; 2) margin buying; and 3) fraudulent loans.

Mon, 07/06/2015 - 22:14 | 6278723 Surveyor4Pres
Surveyor4Pres's picture

Ummm...But the country is run by REAL Communists, not just Commie wannabes like here in the States.

Which means it will never end well for "the people".

Mon, 07/06/2015 - 22:22 | 6278740 CheapBastard
CheapBastard's picture

However, despite their massive corruption, China's QE also built roads, airports, etc and decreased thier peasant population by 20-25% down to about 60% of their 1.3 billion, which is quite alot.

 

Here in the USA, by far and away most of the QE flowed directly into a very small number of people [bankers, CEOs, Wall Streeters, politicians, etc]. Also, instead of enriching and enlarging our Middle Class, just the opposite occurred and as opposed to China our poverty level up, Middle Class decimated, and so on.

 

I am NOT defending the Commie totalitarian gubmint there; I am simply throwing these observations out there.

Mon, 07/06/2015 - 23:04 | 6278844 InvalidID
InvalidID's picture

 

 Do you think the US government was any less corrupt during the Great Depression or into the 40's and 50's? Me either, yet roads, airports, and infrastructure was built on a pretty massive (but useful) scale. While they didn't happen to build spare cities, they did manage to invent everything you use today and land on the moon.

 So while I'm fairly impressed with how well China managed to copy the US (with help from the US and Europe) I'm not at all impressed with what they've accomplished. You'd think when making a copy you'd avoid the known flaws....

Tue, 07/07/2015 - 00:01 | 6278971 847328_3527
847328_3527's picture

So what did USA do this time with all that QE? What great inventions? What wonderful architecture? What?

You're only as good as your last QE result...ancient history like the 1920s does not count.

Mon, 07/06/2015 - 22:39 | 6278779 Arnold
Arnold's picture

Gotcha.  The Limousine commies.

Mon, 07/06/2015 - 23:09 | 6278857 roddy6667
roddy6667's picture

News flash. China hasn't been communist since 1978, but Americans never got the memo.  Any time you have private property, private enterprise, private banking, a stock market, freedom to travel,foreign capitalist companies operating freely, you don't have communism by anybody's definition. They use the term "socialism with Chinese characterisitcs". It is far easier to start and run a company and get rich in China than America. They do capitalism better than Americans.

Tue, 07/07/2015 - 07:36 | 6279477 Casey Stengel
Casey Stengel's picture

About a year ago I had lunch with a govt. official in China. He told me he had been to the US twice and he observed that America was "socialist" and China was "capitalist". I shook his hand and congratulated him on his astute powers of observation.

Mon, 07/06/2015 - 20:46 | 6278446 Tinky
Tinky's picture

What an idiot; should have consulted the banana vendor before risking any capital.

Tue, 07/07/2015 - 07:11 | 6279441 Grumbleduke
Grumbleduke's picture

there's always money in the banana stand!

Mon, 07/06/2015 - 20:52 | 6278453 tahoebumsmith
tahoebumsmith's picture

Ooohh pork fried  rice.. It could  happen in less then 5 or 10 minisss

Mon, 07/06/2015 - 21:02 | 6278487 steveharless
steveharless's picture

wait til you see 2 billion people shaking their fists at the Chinese government.....LOL - can you say revolution?

Mon, 07/06/2015 - 21:11 | 6278513 Tinky
Tinky's picture

Actrually, the "r"s are tough to pronounce.

Mon, 07/06/2015 - 21:16 | 6278531 NoDebt
NoDebt's picture

I thought it was the Ls.  So it would be like a revorution.

Mon, 07/06/2015 - 21:15 | 6278529 foxmuldar
foxmuldar's picture

Wang's hairdresser clipped her good. lol

Mon, 07/06/2015 - 21:20 | 6278539 foxmuldar
foxmuldar's picture

30% dip, sounds like a good buying opportunity. 

Mon, 07/06/2015 - 21:22 | 6278545 YouThePeople
YouThePeople's picture

Does she or doesn't she? Only her hairdresser knows for sure.

https://www.youtube.com/watch?v=hCrEyOWAEVw

Mon, 07/06/2015 - 21:28 | 6278560 user2011
user2011's picture

Isis know how to chop heads.   Communists know how to create bubbles and blow them up their asses.    Living under either Islam or Communism, people suffer.

Mon, 07/06/2015 - 21:40 | 6278605 earlyfrick
earlyfrick's picture

the problem of CHina is that literally EVERYBODY is investing in stock market, you could walk into a motel and ask the receptionist how he or she is doing in his or her stock investment. 

Mon, 07/06/2015 - 21:43 | 6278613 swanpoint
swanpoint's picture

Just like ZH and the other PM+Miner pumpers in August 2011.

Mon, 07/06/2015 - 21:46 | 6278618 Downtoolong
Downtoolong's picture

Sadly for these investors, no fool is great enough (not even the PBoC) to be as great as a 100 million little fools.

Ali Ba Bye Bye. 

Mon, 07/06/2015 - 22:04 | 6278690 Eahudimac
Eahudimac's picture

Buy, buy, buy! Oh, everyone's buying? Then sell, sell, sell!

 

https://www.youtube.com/watch?v=--KwZnLBkB0

Mon, 07/06/2015 - 23:05 | 6278847 Bunga Bunga
Bunga Bunga's picture

1.2 billion fools, who could have thunked.

Tue, 07/07/2015 - 00:19 | 6279025 fowlerja
fowlerja's picture

Thank goodness I did not invest in the China stock market... I listened for once to my regular taxi driver and avoided that haircut...

Tue, 07/07/2015 - 02:21 | 6279193 Sid James
Sid James's picture

The Lord giveth and the Lord taketh away. And then he taketh away again.

Tue, 07/07/2015 - 02:45 | 6279221 juicy_bananas
juicy_bananas's picture

Welp, time to roll out the mobile execution vans and go long.

 

Asians are addicted to gambling.  They should stick to cockfights and bloodsports.

Tue, 07/07/2015 - 03:46 | 6279268 Panic Mode
Panic Mode's picture

They can show off all they want with their easy profits. I am patiently waiting with pop corns.

Tue, 07/07/2015 - 04:55 | 6279304 bentaxle
bentaxle's picture

Is Gartman a hairdresser as well?

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