China Crashes Most Since 2007 Amid "Panic Sentiment"; Over Half Stocks Suspended, PBOC Promises "Liquidity Support"

Tyler Durden's picture


Some context...

For a record 12th day in a row, Chinese margin debt balances have dropped with today's 8.5% collapse the largest in history. As of last night, there were around 570/1694 Shenzhen stocks halted/suspended and hundreds more on the Shanghai bourse leaving more than 54% of all Chinese stocks frozen ($2.6 trillion or 40% of value). China continues to try to manage leverage down (raising margin requirements on stock futures) while encouraging speculation (easing rules for insurers to buy blue chips and financing the purchase of smaller company shares directly) and CYNK'ing the entire market - if it's not open, you can't sell it and the price cannot fall! It's not working as CSI-300 futures are now down 7.9% in the preopen.



China appears to be trying to manage leverage...



The problem is the collateral value is falling faster than the margin debt leaving "leverage" still at record highs...

While encouraging speculation...


China news is domninated by dozens of pages of this...

  • UPDATE: Trading halts have left 1544 companies, equivalent of 54.7% of the Shanghai Composite and Shenzhen Composite, suspended today. (@GregorHunter)

With what we estimate is around 850-900 Shenzhen Composite stocks suspended (over half of the 1694 stocks in the index) and almost 25% of Shanghai Composite stocks, it appears China has resorted to the endgame in managing a collapse...

if it's not open, you can't sell it and the price cannot fall!

In other words - the whole Chinese market just got CYNK'd

* * *

It's not working...



It looks like today could see China go red for the year...

*  *  *

China weakness and European rhetoric wearing S&P futures lower (down 11 points from cash close)...

*  *  *

Another day another attemnpt to stabilize...


Just add this to the list of interventions...

Perhaps if you just stare at it long enough, it will rise...


Just remember this crash is telling us somethinmg about China...

The stock market knows more than any individual investor, and China's is no exception.

As NYU Professors Jennfier Carpenter and Robert Whitelaw told CNBC in January...

This optimism should be taken seriously. This run-up is not a bubble, and so investors should not fear another crash.


Our research shows that after a rocky first decade, which earned China's stock market a reputation as a casino, stock prices in China predict future profits as well as they do in the U.S. Moreover, this predictive power is highly correlated with China's corporate investment efficiency, suggesting that stock prices are teaching corporate managers important lessons as well. However, capital in China is still allocated almost entirely by its massive banking sector. It is time to untie the hand of the stock market, reform listing standards, streamline the IPO approval process now holding up over 600 firms seeking equity capital, and let the stock market allocate capital, too.

Shut Up!!!

As we detailed earlier - none of this was real or indicative of any real economic growth - it was all speculative ponzi and will not end well...

Exhibit 1 - Based on 'fundamentals', The Shanghai Composite has a long way to go...


Exhibit 2 - If Dr. Copper is right about the state of the world, The Shanghai Composite won't find support until it has fallen another 60%...


Exhibit 3 - Judging by historical analogs, The Shanghai Composite will need to destroy all gains in the last 2 years before 'value' is once again seen...


Chinese investor psychology has shifted. Period. The more the government intervenes to lift stock prices explicitly, the more local and professsional leveraged investors will use any strength to unwind their positions (profitably or unprofitably).

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Tue, 07/07/2015 - 21:21 | 6283017 suteibu
suteibu's picture

Hmmmm....looks like America's economic war has opened a new front.

Tue, 07/07/2015 - 21:25 | 6283033 44MagnumPrepper
44MagnumPrepper's picture

But Goldman Cocks says "no bubble" 27% rally?!  


*sniffs glue*

Tue, 07/07/2015 - 21:27 | 6283049 wolfnipplechips
wolfnipplechips's picture

BOOOOOM! This is real f'd up, folks!

Tue, 07/07/2015 - 21:30 | 6283060 Manthong
Manthong's picture

Where is bottom?

Tue, 07/07/2015 - 21:36 | 6283083 Supernova Born
Supernova Born's picture

On the world's face.

Fed's pimply, pasty, purulent ass.

Tue, 07/07/2015 - 21:40 | 6283115 max2205
max2205's picture

Picked the wrong day to quit smoking meth 


Tue, 07/07/2015 - 21:47 | 6283162 Supernova Born
Supernova Born's picture

Day ain't over yet.

Tue, 07/07/2015 - 21:52 | 6283176 TungstenBars
TungstenBars's picture

Even with all of the market anipulation in the west, there's just no fucking way this is going to be contained to the east. I'm really starting to believe 2015 is the year everything visibly breaks. 

Tue, 07/07/2015 - 21:59 | 6283190 knukles
knukles's picture

Krugmanization of Asia.
If I didn't know any better I'd guess the Reptilians are attempting to extinguish mankind for stealing the gold.
                                Don't fuck with the Reptiles!

                 Shoulda stuck with the Mao jackets and collectives.

Hurry!  Jump in the Capitalist pool, in the deep end!  Look what they got out of it!  WTF?!?!?!?!
                    What's that biting my legs!?!?!?  It's Goldielox Shark!

Tue, 07/07/2015 - 22:08 | 6283262 Boris Alatovkrap
Boris Alatovkrap's picture

China government response,

"Bai moa, bai moa, bai moa, bai za fu king di pu!"

Tue, 07/07/2015 - 22:34 | 6283344 toady
toady's picture

Looks like they don't trust those Chinese printers.... only the US printers can be trusted.... until....


Tue, 07/07/2015 - 22:39 | 6283352 JLee2027
JLee2027's picture

Black Monday and Black Tuesday in 1929 actual trading losses of 13% & 12% per Wikipedia


or a record 12th day in a row, Chinese margin debt balances have dropped with today's 8.5% collapse the largest in history

Tue, 07/07/2015 - 22:54 | 6283412 Oh regional Indian
Oh regional Indian's picture

There is a classic trifecta in our lives......

First you PRAY, then you PLAY and then, everytime, you PAY.


Round and round we go....

Tue, 07/07/2015 - 23:15 | 6283466 erg
erg's picture

Oh man, where are my nitroglycerin pills. I always keep them nearby and when you need the damn things...nowhere to be found.

Wed, 07/08/2015 - 00:07 | 6283590 DeadFred
DeadFred's picture

I've got some with me. You never know when you (or someone else) will need them.

Wed, 07/08/2015 - 01:29 | 6283724 Four chan
Four chan's picture

no fucking way do we skate through this without the shorts reaping some great rewards.

Wed, 07/08/2015 - 02:33 | 6283817 Squid-puppets a...
Squid-puppets a-go-go's picture

funny how you will never hear a spokesman use the phrase "unreasonable buying"

Wed, 07/08/2015 - 03:01 | 6283859 bunzbunzbunz
bunzbunzbunz's picture

A little free bitcoin is the easiest preperation you can make:

Wed, 07/08/2015 - 03:40 | 6283909 Bokkenrijder
Bokkenrijder's picture

...but but but, the Chinese are so smart because they buy so much gold, right?

According to the village idiots here on ZH and KWN, the Chinese are sooooo much better and smarter than we in the West, because they don't believe in bubbles and government intervention. Right? Riiiiight....

Furthermore, China is the leading nation when it comes to protecting consumers, fighting pollution, internet privacy and human rights!

p.s. where is Jim "my-daughter-is-learning-Mandarin" Rogers these days? Is he still huffing and puffing on that treadmill in Singapore?

Wed, 07/08/2015 - 04:22 | 6283956 dreadnaught
dreadnaught's picture

Benjamin Fulford sez™: the NWO wants to clean the planet of Asians when the population wipe out commences down to 500,000,000

Tue, 07/07/2015 - 23:13 | 6283472 NoDebt
NoDebt's picture

China- the envy of the west with their "modern" central command and control economy.  These morons are as over as Japan in 1990.  Sure, their economy has been a Petemkin Village for years and nobody cares.  But lose control of your stock market for a couple weeks and watch the confidence collapse and the money flee.

Tue, 07/07/2015 - 23:51 | 6283559 suteibu
suteibu's picture

The difference is in scale and demographics.  Most Japanese live in urban centers so the loss of jobs relative to the population is more affected by stock market collapses.  In China, as large as the cities are, a larger protion of the population is relatively unaffected by the actions of the markets. 

This is not to say that you are wrong about the general effect of market confidence in China, only that the comparison to Japan is not the same.

Wed, 07/08/2015 - 00:35 | 6283635 Boris Alatovkrap
Boris Alatovkrap's picture

That is "Potyemkin" Village. Is look nice from river boat, but not so too nice on river bank.

Wed, 07/08/2015 - 02:31 | 6283813 Four chan
Four chan's picture

i guess being fooled by the artifice of your own potemkin village, like ghost cities, and fake paris's, and new york's is the greatest foolishness of all.  everybody wang chung tonight!

Wed, 07/08/2015 - 01:27 | 6283714 Lore
Lore's picture

Excuse me, Mr. Looking-Down-Your-Nose, but isn't the American situation a similarly psychopathic sham?


Wed, 07/08/2015 - 03:55 | 6283924 Bokkenrijder
Bokkenrijder's picture

@ NoDebt

Spot on mate! Asians can not think even one nanometer outside the box and have a desperate genetically engrained urge to control things in order to avoid losing face. Asians are hopelessly bad in any kind of crisis management. One giant totalitarian and centralized nation (we're not talking about the patchwork EUSSR here) and when the stock markets sell off, the corrupt 'leadership' is shell shocked.

These idiots bought US T bills at exactly the wrong time, and now they are buying gold at the wrong time, so forget about a gold-backed Yuan!

As I've said many times: all the Chinese can do is copy/paste what others have done, whether it's copying Louis Vuitton bags, copying Japan's economy, copying stock and housing bubbles, copying fiat currency or copying government intervention and "the wealth effect."

Wed, 07/08/2015 - 04:09 | 6283947 Kina
Kina's picture

Seems the outright racists have arrived. Little rednecks fucking their sisters cant stand Asians Im told.

Wed, 07/08/2015 - 05:22 | 6284012 Bokkenrijder
Bokkenrijder's picture

Seems the outright racists have arrived. Little rednecks fucking their sisters cant stand Asians Im told.

You're either Asian or you've never been to Asia. So back to the ZH commentator's favorite hobby then: Jew bashing + China and Russia worshiping.

Wed, 07/08/2015 - 11:01 | 6284632 roddy6667
roddy6667's picture

Maybe there is a valid criticism of Jews and most likely Putin is a great leader. Certainly, being proud of the decaying American culture is not something you want to have on your resume when the Big Interview comes.

Wed, 07/08/2015 - 15:42 | 6283968 Lore
Lore's picture

That's a hoot, coming from an American. Your entire so-called culture is one grand plagiarization. And how's that crisis management coming along? 

Chinese civilization was ancient when your ancestors were still jacking off in caves.

Wed, 07/08/2015 - 06:50 | 6284100 1033eruth
1033eruth's picture

That's what the Borg were.  Copy and pasters.  You copy and paste and figure out what the best elements are for assimilating and discard the rest.  That's all they did was steal technology.  They didn't innovate anything and then incorporated it into the collective.  

This is Chinas first venture into stock Ponzis.  They will copy and paste our HFT, algos and Fed proxies soon enough.  

I'm guessing they thought there titanic population would keep the Ponzi going a lot longer than it did.  They'll figure it out and get it pumped higher than ever before.  1.375 billion people and counting.  And nobody loves to gamble more than the Chinese.  


Wed, 07/08/2015 - 08:56 | 6284529 Calmyourself
Calmyourself's picture

I don't appreciate you disrespecting Thomas Freidman that way, only I can call him a Chinese command and control cocksucking Communist wannabe, there back in your place, no debt..


Tue, 07/07/2015 - 23:15 | 6283476 TruthInSunshine
TruthInSunshine's picture

The Chinese stock market is the world's biggest Ponzi (relative to other stock markets), with well over 70% of the listed companies being shams, and the remaining 30% being overvalued by 10 to 200 times.

In order words, Chinese markets should fall 70% to 85% FROM PRESENT LEVELS, in order to even get close to rational valuation, with maybe 50% to 60% needing to be delisted altogether.

Tue, 07/07/2015 - 23:45 | 6283541 kliguy38
kliguy38's picture

90% and you can say its close.............

Tue, 07/07/2015 - 23:55 | 6283568 BringOnTheAsteroid
BringOnTheAsteroid's picture

You lost me with the term "rational valuation".

Can any gurus on ZH decipher what TIS is talking about.

Wed, 07/08/2015 - 00:13 | 6283602 TruthInSunshine
TruthInSunshine's picture

If you can't decipher what "rational valuation" means, no one will be able to help you.

Wed, 07/08/2015 - 00:33 | 6283632 Boris Alatovkrap
Boris Alatovkrap's picture

How is "irrational exuberence" to price in for rational valuation? Maybe we are ask Mr. Alan Greedspan?

Wed, 07/08/2015 - 06:55 | 6284114 new game
new game's picture

to da moon, does that help?

Wed, 07/08/2015 - 00:45 | 6283654 BringOnTheAsteroid
BringOnTheAsteroid's picture

Forgot the sarc tag.

Wed, 07/08/2015 - 00:50 | 6283660 TruthInSunshine
TruthInSunshine's picture

Very well. My bad.

To Boris: I would buy you as much Stoli as you could drink. Missed you, comrade.

Wed, 07/08/2015 - 04:25 | 6283960 BringOnTheAsteroid
BringOnTheAsteroid's picture

No drama, I think your posts are some of the best on ZH

Wed, 07/08/2015 - 00:32 | 6283631 MontgomeryScott
MontgomeryScott's picture


'Houston, we've had a problem'.

You know, B.O.T.H., back when I was shot down over Afganistan fighing the Taleban insurgents, journo-lists like myself used to have a saying for this moment of clarity...

(Sorry, Brian, but we seem to have the live feed of the Shuttle launch via CNN.)

'Rational valuation' is that shit that a con artist attempts to sell you on. It 'makes sense' that this highly over-leveraged and overvalued (whatever) should be invested in IMMEDIATELY. By the way, DON'T SELL BEAR-STEARNS!

Wed, 07/08/2015 - 01:33 | 6283733 disabledvet
disabledvet's picture

"Never under-estimate a comma d economy's ability to command anyone and everyone to throw ALL the money into the furnace."

I mean seriously...there is aost almost a PERFECT rationality here if. We're talking "follow the Party line or else."

In the meantime ponder the MEANING of such an Elic Fail should it materialize really is quite scary.

At least in the Great Depression they still kept the markets open. "Shutting the trading down means valuation of ZERO."

If you think this is a good time to be a rice farmer you might want to bone up on that apaect of these types of meltdowns too. The term "LIKE HELL IT DOES!" comes to mind...

Wed, 07/08/2015 - 01:50 | 6283762 Wile-E-Coyote
Wile-E-Coyote's picture

Hey cheer up US women won the World Cup (soccer) Sepp Blatter to keep his job.

Tue, 07/07/2015 - 22:46 | 6283374 TeamDepends
TeamDepends's picture

May you live in incendiary times.
-Chinese Revenge Dragon

Wed, 07/08/2015 - 00:47 | 6283657 mkkby
mkkby's picture

C'mon folks.  This isn't even close to a crash yet.  Shanghai comp hasn't even retraced HALF of the 52-week gains.

Still, I'd love to know which western banks (cough goldman) the CIA has put up to this.  Pump and dump.  Payback for some political games between east and west.  Don't try to bail out Greece and build your sand castles near Jap waters.  We will crash your economy and cause an egg foo young spring.

Wed, 07/08/2015 - 01:36 | 6283741 disabledvet
disabledvet's picture

Down fifty (percent) is the same as up 100 (percent)

"A halve equals a double."

Move along...

Wed, 07/08/2015 - 05:11 | 6284006 bada boom
bada boom's picture

Agreed, a good majority of the shanghai rise occurred in about 4 months time.

Right now, the dow futures are down about 170, but europe is positive. WTF?

Tue, 07/07/2015 - 22:09 | 6283265 TruthInSunshine
TruthInSunshine's picture

Saw wise man last week, who sold his property on ocean in Florida to high end hotel.

Wise man said his sources on ground in China - most of whom are in manufacturing and commercial real estate - say things are far more dire than even what's being reported, and that money is fleeing China at sensational clip.

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