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Chinese 'Dead Cat Bounce' Fades, "Hostile Sellers" Appear As Goldman Warns "Not Yet Fully Purged"

Tyler Durden's picture




 
  • *CHINA'S SHANGHAI COMPOSITE INDEX FALLS 0.6% TO 3,687.36 AT OPEN
  • *FTSE CHINA A50 INDEX FALLS 2%

Amid the highest level Typhoon warnings, China's stock market continues to storm as only 49% of Chinese stocks are halted (down from 54%) as local analysts fear yesterday's bounce (just like last week's) was nothing but a dead cat bounce: "bounces like today prolong the timeframe to get that final bottom in place." For the 14th day in a row margin balances declined with the pace accelerating (down 10.9% yesterday alone) for a total over 36% decline so far. Seemingly on pain of death, someone is selling Chinese stocks as CSI-300 futures opened a mere 0.2% higher then sold off - no follow through for now. Goldman warned to expect another 30% decline margin balance and concludes, China "hasn't yet fully purged."

In case you're wondering why we bounced yesterday (aside from the death threats to shorts)... It was a very technical bounce off the 200DMA...

 

and for now there's no follow-through...

 

Stroms are gathering...

  • *CHINA ISSUES HIGHEST-LEVEL ALERT ON TYPHOON CHAN-HOM

As more companies limp out from nehind the curtain of invincibility...

  • *NUMBER OF CHINESE COS HALTED FROM TRADING FALLS TO 1,422
  • *A TOTAL OF 49% OF CHINESE STOCKS ARE HALTED FROM TRADING (down from 54%)

Goldman noted the suspensions of shares are "really the key issue..."

With a number of stocks suspended - we've had 32 percent of the market cap being suspended - we haven't really had a clearing of price that's fully taken place and the deleveraging which has been going on hasn't yet fully purged

 

That's really what we're looking for for a sign of a market bottom."

Margin balances continue to plunge in accelerating manner... now down 36% from the highs...

 

Where is all the margin concentrated (via SCMP)

Goldman also noted margin balances still have a long way to go...

"We think the rough equilibrium level would probably be about a trillion

 

That would be where the margin balance relative to free float market cap would be commensurate with the level that we've got here in the U.S."

 

Another 30% reduction in margin balances could happen in the next five days to two weeks

And finally for some context on the week...

 

Are you going to buy this dip?

 

*  *  *

And for those think it's over... it's not...

 

And for China to get back to 'norms' there is considerably more left...

 

As one local analyst warned...

"Unfortunately, with bounces like today, this emotional and high-volume trading capitulation doesn't come to fruition. Then add to the mix the fact that half the stocks in China are halted and this bottom becomes harder to achieve," said Brett McGonegal, chief executive of Reorient Group, a Hong Kong-listed investment firm.

 

"We were almost at the bottom and bounces like today prolong the timeframe to get that bottom in place."

 

Charts: Bloomberg

 

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Thu, 07/09/2015 - 21:21 | 6293007 Ginsengbull
Ginsengbull's picture

It's like that ice cream.

 

Dipping dotz.

Thu, 07/09/2015 - 21:29 | 6293032 TruthInSunshine
TruthInSunshine's picture

Electrical usage, shipping, railway utilization all point to a massive (historic) drop in Chinese economic activity.

The farmers, housewives & speculators who've plowed into the phantom of wealth known as the Chinese equity markets, where an unprecedented number and % of listed companies are are essentially bankrupt or were shams to begin with, are about to be wiped out, along with pension, insurer and mutual funds.

This is really the onset of a massive crash in China, and no sell order ban by the Chinese Central Command is going to prevent it.

Thu, 07/09/2015 - 21:38 | 6293065 Manthong
Manthong's picture

When you fill your western gut with a big meal from a Shenzhen restaurant which includes all manners of stuff you normally don’t eat (including maybe a little bouncy dead cat meat) and chase it all down with a half dozen Tsingtao’s ..

I guarantee there will be a purge.  

Thu, 07/09/2015 - 22:16 | 6293235 Boris Alatovkrap
Boris Alatovkrap's picture

Just remember to shave cat first before grill on spit!

Thu, 07/09/2015 - 23:02 | 6293416 Apostate2
Apostate2's picture

But Boris, that means geming (revolution i.e. flay the hide).

And there is more than one way to skin the cat.

Thu, 07/09/2015 - 23:55 | 6293595 Boris Alatovkrap
Boris Alatovkrap's picture

But crispy skin of cat is culinary excellent, is better shave than is flay!

Fri, 07/10/2015 - 00:14 | 6293651 Zero Point
Zero Point's picture

Mmmm... Crispy skin cat. Just like my local Chinese restaurant makes.

Fri, 07/10/2015 - 00:58 | 6293794 Manthong
Manthong's picture

Some of the Chinese cooks here have been known to go after the Canada Goose that are all over these parts of the U.S.

That Moo Shu Chicken you like so much for carry out might feature a slight cackling bonus.

Thu, 07/09/2015 - 22:18 | 6293243 willwork4food
willwork4food's picture

I used to buy Tsingtao's Pejeio all the time until I saw the conditions of their rivers and pollution. Got to wonder where the water is coming from.

Thu, 07/09/2015 - 23:53 | 6293586 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is remember two year ago is many bloating pig is swim in China river system. Maybe is add flavorful to Tsingtao Beer?

Yu kan du ling ku bi-a, ba mei ni fi shu dai jya sui ming.

Fri, 07/10/2015 - 03:30 | 6294015 UncleChopChop
UncleChopChop's picture

hey truthinsunshine.. do you have any go-to sources that you could share? regaring chinese elec util, shipping and railway util you mention. thanks!

Thu, 07/09/2015 - 21:27 | 6293024 pacu44
pacu44's picture

Captain obvious with a firm grasp of the situation... Thanks GS

Thu, 07/09/2015 - 21:55 | 6293148 disabledvet
disabledvet's picture

BEHOLD THE CLIFFS OF INSANITY!

Thu, 07/09/2015 - 23:01 | 6293411 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is prefer pit of despair.

Thu, 07/09/2015 - 21:30 | 6293035 chunga
chunga's picture

Yeah Blankfein eats kittens and puppies every day...swine.

Thu, 07/09/2015 - 21:47 | 6293106 Apostate2
Apostate2's picture

Guess you missed this little gem...

http://blogs.wsj.com/chinarealtime/2015/06/10/goldmans-blankfein-on-skip...

I just want to be an 'interesting person' enjoy.

Thu, 07/09/2015 - 21:31 | 6293038 buzzsaw99
buzzsaw99's picture

when 100% are halted that will be the final bottom

Thu, 07/09/2015 - 21:36 | 6293052 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

You can buy, not sell.

You can eat, not shit. :(

Thu, 07/09/2015 - 21:37 | 6293056 nmewn
nmewn's picture

"ONLY" fifty percent of Chi-Com companies aren't allowed to be traded freely by the government, down from 54%, wooo hooo!!! Now theres some real centrally planned "progressive" authoritah for ya and who said Chinese markets aren't Farrreeeee!

Where do I sign up for the always up ones and the accompanying insider news letter & tips? ;-)

Thu, 07/09/2015 - 21:42 | 6293082 Apostate2
Apostate2's picture

Tip: read above (or below) which ever way it goes.

Thu, 07/09/2015 - 21:40 | 6293072 FreedomGuy
FreedomGuy's picture

For all the people who think China is a modern clever juggernaut, I think this shows the opposite. While central planners rule every country this is silly near Maoist kinds of interventions. Jail, allowing and disallowing traders, etc. is really an old school autocratic direct intervention. It's almost juvenile. "Markets must only go up!". Any market that doubles in a year is due for some pull back. It shows that they have become economic fascists. They allow more market activity than the old hard-line commies but they are still firmly in charge. It shows they have enough sense to want to milk the market for economic strength but they still show their hand as autocrats. 

I think if you put much investment money into Chinese stocks you had better realize that you could have it confiscated or lose access to it one day if it suits the Chinese government.

Now, the really interesting debate is whether or not we are a whole lot different in the West or just more sophisticated in hiding the same power.

Thu, 07/09/2015 - 21:57 | 6293154 disabledvet
disabledvet's picture

"Never close Mr Market or Mr Market close you...

Thu, 07/09/2015 - 21:40 | 6293075 Apostate2
Apostate2's picture


I'm having a laugh. The dead Mao (cat) bounce. So I repeat myself.

'Wei guo jiepan' ('Bear the burden for the country' no matter how far the market falls)

“Fight to save A-shares. Join the battle if you can. If you don’t have bullets, yell.” (neon sign over a train station posted on Weibo)*

* A note about the 'you can't sell for six months if you own more than 5% of a company's shares'-- just divvy up the assets to various and sundry relatives and SELL.

Thu, 07/09/2015 - 21:42 | 6293085 Mentaliusanything
Mentaliusanything's picture

Confucius say Something.. anything about picking bottoms

Thu, 07/09/2015 - 21:55 | 6293145 Apostate2
Apostate2's picture

Yesh, the rectification of names (zhengming).

 Raising glass, ganbei ! (Bottoms Up)

Thu, 07/09/2015 - 21:51 | 6293122 williambanzai7
williambanzai7's picture

Centrally planned stock market crash is a perfect metaphor for the times we live in.

Thu, 07/09/2015 - 22:21 | 6293256 willwork4food
willwork4food's picture

Yea, not like it was planned or anything from those in the know.

Hoocuddanone?

Thu, 07/09/2015 - 21:59 | 6293167 disabledvet
disabledvet's picture

Ooopso.

What I MEANT to say...

Thu, 07/09/2015 - 22:15 | 6293230 erikaappleihzyjtyeg
erikaappleihzyjtyeg's picture

Dead cat kung pao bounce

Thu, 07/09/2015 - 22:20 | 6293247 erikaappleihzyjtyeg
erikaappleihzyjtyeg's picture

"Toward the end of the talk, Mr. Blankfein told the audience he wished he was 40 years younger–and Chinese. “You are lucky to be in China at this time of growth. Fifty years ago, you wouldn’t be able to be an entrepreneur,” he said, adding that in 50 years, there won’t be the first massive generation to have a chance to start businesses.

Minutes later, he painted a more realistic picture for the students. “I should say you’re in the right place at the right time, but you also didn’t invent life.

Intelectual mush.

 

Thu, 07/09/2015 - 22:20 | 6293250 jonjon831983
jonjon831983's picture

Keep pushing!

SHANGHAI STOCK EXCHANGE A SHARE INDEX 4,007.42 +120.12 
(+3.09%)
JUL 10

 

Thu, 07/09/2015 - 22:21 | 6293259 neilhorn
neilhorn's picture

That trader in the pic needs one of those screens that shows the right hand side of the chart. Gamblers Annonymous will open a million chapters in the next three years.

Thu, 07/09/2015 - 22:46 | 6293295 John Law Lives
John Law Lives's picture

Corrupt fvcking Chicoms.

FUBARtoHELL.

Thu, 07/09/2015 - 22:33 | 6293296 Gab Timov
Gab Timov's picture

SHCOMP

And then it went way up and then down a little, and then back up, so now it is at + 177.486

Fri, 07/10/2015 - 08:05 | 6294448 fromthinair
fromthinair's picture

zh, you say, "these things get better and better" .. for whom? at somepoint you have to get over your obsession with -- you are the first to find, understand and publish things.... and you celebrate when the doom and gloom happens your way. 

We are faced with different challenge now, therefore, you need to understand your responsibilities.

No one knows what will happen... not even the so-called-perpetrators. You should focus on what happens if people who guide civilization on wrong path manage to patch things up temporarily and claim another false victory ... and then set up people for further chaos down the road...

Focus on solutions... and trust me ... you have none.... had you any, you would not be anonymous. You still have doubts.

 

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