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China Stock Rout "Rocks" Property Market: "Massive" Cancellations Expected
To be sure, we’ve had our fair share of laughs at the expense of China’s newly-minted day traders.
Back in March, Bloomberg highlighted a study which suggested that some 31% of new investors in China’s equity markets had an elementary school education or less. Shortly thereafter, we began to look at data from the China Securities Depository and Clearing Co which showed that millions of new stock trading accounts were being created in China every single month. Once reports began to come in from the front lines of China’s inexorable equity rally, it became clear that (to say the least) not everyone pouring money into the SHCOMP and The Shenzhen was what you might call a "seasoned" investor.
From there, all it took was the suggestion from Bloomberg that in some cases, Chinese housewives had traded in the crochet kit for technical analysis and the race was on to see who could come up with the most entertaining characterization of China’s day trading hordes. Although the mainstream media has been careful not to be terribly explicit in their ridicule, the increasingly hilarious pictures of bemused Chinese grandmas staring at ticker tapes that have appeared atop WSJ and Reuters articles betray the fact that everyone, everywhere sees the humor in a multi-trillion dollar stock bubble driven by margin-trading hairdressers.
Admittedly, all of the above was even more amusing on days when Chinese stocks closed red, as it became quickly apparent that many Chinese investors might not have fully appreciated the fact that stocks can go down as well as up.
In the good old days of the China stock rally (so, around two months ago), down days were few and far between and the outright confusion that reigned in the wake of a rare close lower served as a much needed comic interlude for the slow motion train wreck unfolding in the Aegean and, on the weekends, at various Euro summits.
However, once the unwind began in China’s CNY1 trillion backdoor margin lending channels, we couldn’t help but feel slightly sorry for the millions of Chinese who quickly went from bewildered to dejected after watching their life savings evaporate over the course of a brutal three week sell-off that totaled more than 30% on some exchanges.
Due to significant retail participation and due to the fact that the equity mania had served as a distraction for a nation coping with decelerating economic growth and a bursting property bubble, some (and we were among the first) began to suggest that the broader economy, and indeed, social stability, may be at risk in China if stocks continued to fall.
The extent to which this suggestion represented a real concern (as opposed to the ravings of a tin foil hat fringe blog) was underscored by the extraordinary measures China adopted in a desperate attempt to stop the bleeding and later by several sellside strategists who began to warn about possible spillovers into the real economy.
Now, with Beijing still struggling to restore the stock bubble, the first signs of knock-on effects are beginning to emerge. Here’s Nikkei with more:
Turbulence on China's equity market is starting to rock the country's property market. Investors are quickly pulling their cash out of housing they purchased to cover losses incurred by stock investments. Some have begun offering discounts on property due to difficulties with finding buyers. Continued turmoil on the stock market looks as though it will have a heavy impact on the country's real estate market.
China's stock market rally also helped drive up sales of domestic homes. The Shanghai Composite Index surged 60% from its low of around 3,200 in early March, rising to 5,166 logged on June 12. China Securities Depository and Clearing said that the number of accounts opened to trade yuan-denominated A-shares reached 980,000 in May in Shenzhen, where property prices are climbing faster than other areas. The figure accounted for roughly 80% of the total 1170,000 accounts in Guangdong Province, where large numbers of such account holders reside.
Many newbie investors, who have just jumped into the stock market, likely gave a fresh impetus to the property market. China's share price upswing prompted investors to reach out for new investments, including houses and other properties. A property analyst at major Chinese brokerage Guotai Junan Securities said that sales of luxury properties worth over 10 million yuan ($1.61 million) each for the first half of the year topped annual sales last year in Shanghai and Beijing.
After this, Chinese stocks began to crumble. In early July, the Shanghai Composite Index dropped more than 30%, after hitting a seven-year high in mid-June. Investors who suffered big losses on the stock market were forced to sell property and cancel real estate purchase agreements. The Hong Kong Economic Times said that consumers are increasingly asking real estate firms for grace periods on down payments for mortgage loans, as they run out of cash because of weak stocks.
Some canceled home purchase contracts, while others canceled mortgage loans, according to China's largest property developer China Vanke, which has a strong foothold in Shenzhen. Local media reported that an official at China Vanke is concerned about massive numbers of cancellations in the future.
So no, the damage isn't "contained" and indeed it's somewhat ironic that the first place the contagion is showing up is in China's property market. What's particularly interesting here is that one argment for why the collapse of China's equity bubble would not spill over into the real economy revolved around the fact that the majority of Chinese household wealth is concentrated in real estate. "Ultimately, we think the impact of the sell-off in Chinese equities on the real economy will be relatively limited. This is because equities are only 10% of household wealth (at peak; just over 5% at the turn of the year)," Credit Suisse noted last week.
If, however, what Nikkei says about the knock-on effect in property is true, it could put further pressure on an already fragile housing market. On that note, we'll close with the following excerpt which is, ironically, from the same Credit Suisse note cited above.
House prices are now falling at a record annual rate – the first time they have fallen without it being policy induced. With housing accounting for just over half of total household assets, the negative wealth impact could be significant.
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communism and capitalism are dead, long live corruptism!!
Yep, Yellen is shakin' in her panties that the ChiCom economy doesn't come crashing down. Who will buy US Treasuries then... OMG!
China is not buying the US paper, they have been selling it. The US paper is being bought up by Puff the Magic Dragon, in the land called Honali, or some other "made up" place.
The Fed buys all the stuff and rebates all the coupon income back to the US Treasury, FFS.
It doesn't matter if rates go sky high. The Treasury issues the debt, the Fed buys it coining new money (digital form) receives the interest income and turns around and hands it right back to the Treasury.
A closed and nested circle jerk.
This is not an assumption, guess or proposal, it's how the thing really works.
A self-funding Ponzi.
Ony works for a while Knuks. But you are correct. There ain't no Volcker Rule oversight at the Fed.
Knuks,
From what I understand the Treasury issues the debt in the form of bonds and notes. The banks buy the bonds and notes and sells these to the Fed for a small percentage profit. The Fed may return "most" of the interest but does keep all of their costs plus a percentage of the interest as a fee for service. So no matter what, the Treasury always owes more than it receives. While the treasury receives most of the cost and interest of the bonds and notes back from the Fed it always adds to US debt and enrichment of the bankers. Granted the addition of debt is a small percentage, but when you issue trillions in debt obligations on top of a bankrupt government the size of the debt owed continues to rise with no let up in sight.
Without a central bank the government would be unable to borrow anywhere near its massive amount of debt plus unfunded obligations the politicians have racked up to keep the sheep calm. All this while bankers, multinational corps. and politicians enrich themselves and the sheep get more of their fleece clipped every year. Pretty soon the sheep will not only get all their fleece clipped but the gov. with the aid of the central bank will start to take some of the hide with the fleece.
the place is Belgium
It's called facism - it doesn't need a new name.
Cock sucker and his voters call that shit hope and change
Over a billion Chinese.
As Richard Pryor once said: "Do anything to keep de mind off da booty."
(Pryor was a prophet disguised as a comedian)
One of Richard Prior's funniest movie scenes... trying to teach Gene Wilder how to "look bad" as they get locked up in jail...
https://www.youtube.com/watch?v=kNbZcT8RXgE
And, he also said "There are two billion chinese people livin' in China. That's how you know someone's doing some serious fucking..."
<< some 31% of new investors in China’s equity markets had an elementary school education or less.>>
They're playing a similar casino like many Merikans who fail to understand the stawk market is rigged against them. Mainly only insiders and HFT make money in this market.
Had a brief talk with my step-dad, decent guy, when he has no where else to go he can come here...
He's newly retired, less than two years, taking his time to tour, with mom, in an RV. (I call them homeless by choice.)
He retired wealthy, gets a pretty heavy pension from a water company and SS. Guy was/is an engineer and made pretty good bucks his entire life.
We were at a play my son was in and at intermission he started asking what I thought would be going on with our finances (Mine, not the publics). I explained that we just refinanced the house, to 1/2 the interest rate, we're taking the cash to do necessary improvements (a reltively minor amount of the dough) and the rest will be used to buy gold, silver and lead (FMJ). He asked is that for the IRA gold option for your 401-k? I said No, I'm getting physical metal because I stopped contribution to my 401-k in 2008, no longer trust the financial system, and expect banks to crash pretty soon, indications are September, in a Cypress-style fashion. I have no trust, faith, or value in the US financial system and want to be independent from it. The cash I recieve on Monday will be totally 'depleted' by Tuesday, if not Monday night. [Monday is an eye exam as it appears I'm going blind...some sort of macular something. Going blind at 60 or so is going to be tough to adjust to, my fingertips no longer have any sort of sensitivity, so I won't be able to read the Braille at the ATM drive up window.]
He got all somber, what do yo think they're going to take your 401-k and roll in into government bonds? I said yeah, then five minutes later they will sweep the banks for any balance over $1,000. Ten minutes later they will announce a bank holiday. The collapse will be nearly instantaneous because we are the reserve currency and the entire world will push us into an instant collapse.
He got pretty quiet, until dinner after the show. Then said, if it happens can we come to you? Fuck, yeah, none of us will like it, but we'll make do. Just make the call as early as possible to I can stock up more shit.
I wish I could find a flaw in your scenario, but I can't.
They might leave us $10,000 for a day or two, before the never ending bank holiday.
Long silver and lead.
Give him a list of stuff to bring.
May as well get some advantage out of the extra mouths to feed/look after/defend etc.
Also helps em feel involved from the get go.
Tell him to pack the RV with rice and beans.
Events may prove you right at some point in the future (most likely centuries from now) but right now, it appears to me that you are delusional, perhaps having indulged your dystopian fantasies by reading too many doom and gloom blogs.
@OldPhart - Yes, the scenario you put forth doesn't surprise me. A few years ago, ole Jim Rogers over in Singapore spoke of such a possible thing happening to USA retirement accounts.
Here's the part I can't figure: most retirement accounts are invested, at least partially, in stocks (directly or as mutual funds) For the Feds to get their hands on the CASH, those investments would have to be sold. So:
a) at that juncture, sell to whom?
b) companies all over the country would be financially devasted after their stocks get hammered from mass selling. Are we supposed to believe that the Feds will buy all these companies to prevent them from collapsing?
Who can shed some reasonable light on how the "swap" of invested retirement accounts to Govt bonds could realistically occur?
The question is not whether there will be contagion. The question is how far it will spread and how long it will take. Financial markets are rigged all out of relation to value in China, the U.S., Japan, the E.Z.
Q: what should you do in case of nuclear attack?
A: Curl into a ball, put your head between your knees, and kiss your ass goodby.
My ancestors didnt travel 4000 miles to america to be sold out by present day politicians to the corporations to be overrun by immigrants so that the middle class would be eliminated!
The deed is done. Yes, they did.
2ND amendment like a moterfucker my friend
Yeah, neither did the Greeks...
No they were the immigrants who over ran the occupants.
IIRC DHS advice was to grab some scissors.
Q: what should you do in case of nuclear attack?
I was taught that we should hide under our 1960's school desks until the all clear signal was given. Did something change?
Just duck and cover and you'll be fine.
Saw some video about Russia from like 1905 through till Krushev.
Some unimaginable terror for Decades.
In fact they said that was what Crazy Lenin was asking for, Demanding. Terror.
They have some pretty good newspaper figures on deaths from the Checka Police or Revolutionary Guard... along with Gulag Reports. And the rules of the Revolution were to send all Foreigners to Concentration Camps or Gulags.
They considered people as useless eaters. So they used them as slave labor to build capital equipment and infrastructure for their Revolution or their personal power or military power or whatever.
Looks like both USSR & China deliberately starved their own people by the millions, hundred of millions.
Estonia was glad when the Nazis captured them from the USSR, since the work conditions and slaving for the Nazis was much better.
But was like 140 Million Died in USSR or Russia and like the same thing in China under their revolution.
There was little in Reeducation. They just killed Intellectuals in Purges to protect the power of the Government.
Granted people have to starve for a while before they lose their humanity and will be a force labor guard or kill their own people.
I am optimistic that in the USA, they want to keep the system going and keep earning more billions of dollars... so they would not carry out deliberate purges and starvation like the Communists.
Gulag Archipelago by Solzhenitsyn is such good book and covers these topics you mention with many deeply personal accounts. That book made laugh out loud, nearly cry, & ponder the enormity of the absurdity of such a society. I read it upon the recommendations of ZHedgies. Highly recommended to those who have yet to read it.
Mayer
Should be required reading. A lot of meat for today's thin gruel.
K
Does this also mean that homes in Brooklyn will no longer be purchased for $1.5million in cash from a suitcase with Air China tags on it.
That's gonna ruin "Big Bird" DiBlasdio's budget, big time.
Old Mr. Microphone commercial - YouTube
Bloody hope so, foreign money is one of the reasons for the insane property prices in London as well.
Why are there no negative consequences ever acknowlwedged as being possible by financial analysts until after they are absolutely already undeniably happening?
I guess I know the answer.
whatever you think you know, employ a big multiplier...
it is going to be far far worse than what you think you know.
me, see/hear/say nothin'. ;-p
DNA database. It may purge these fucking idiots in time. We'll see how aggressive this technology proves to be.
;)
Baltic Index shipping containers are the new housing norm.
Who wants to belong to the billionaire paper cut death club?
My ancestors didnt travel 4000 miles to america to be sold out by present day politicians to the corporations to be overrun by immigrants so that the middle class would be eliminated!
Yes they did.
"Admittedly, all of the above was even more amusing on days when Chinese stocks closed red, as it became quickly apparent that many Chinese investors might not have fully appreciated the fact that stocks can go down as well as up" When Chinese/Japanese stocks go up, the color is RED not GREEN. The number of trading accounts going up so dramatically, may be a pointer to people opening many accounts per person, to get around the limits.
How much you wanna bet china markets will be right back at new alltime highs within a month? After their crash, theyv'e already retraced 50%. CSI300 was down 40% in one month from the highs and is now only down 19% from the alltime highs.
I sincerely hope so, I would like to ride them down a 2nd and maybe even 3rd time.
The recent bounce is due to a halt in trading for most shares and massive government mandated buying--they've moved from Texas hold'em to Russian roulette.
Yes, we all know that and just like over here in the US, they won't let stocks go down either. That massive pump we got in the markets right after the greece deal was not just investors and hft's jumping back into the markets. It was CB's driving the shit up like they always do coming to the rescue. There's no proof that this can't last for a very long time. They have complete control of the markets. Oh yea, and when the market has massive sell orders coming in, "glitch" and they shut it down. Game is rigged man just like in China. There is no real market anymore. China is on the hot seat right now so they need to save their markets more than anyone. I'm betting they pull it off.
(Roosters:)
World Economy Collapses, Zionists make Huge Profit"
New home prices in China have gone up for the last 2 months. Also, you are cherry-picking the stock market chart to make things look bad. Here is a chart of the Shanghai Composite Index from 1990 to last Friday.
http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{%22range%22:%22max%22,%22allowChartStacking%22:true}
Where is the "crash"?
Sorry to spoil your Disaster Porn.
if you bought the index 25 years ago then its just a bump on the road, however if you bought it a month ago and look at value before the dead cat bounce then you were down 40%
The politicians there differ not from politicians anywhere else and will not let their stawks collapse, at least not for long.
And their housing market will never 'collapse' esp in important cities like Beijing, Shanghai and a handful of others. The smaller cities yes maybe they will go down a bit.
If I were Chinese I'd be putting a chunk of money into those index funds right now. We all saw what the Fed/bankers did to the Dow here.
21st Century Markets
Think again about your comment. Then take the ice bucket challenge.
Last couple of months of the Chinese Finger Trap has been mainly Joe six-pack people putting their life savings into the 'market' because that's what all the local propaganda told them to do.
Joe Six-pack has watched his initial investment plummet. They've effectively been hosed, and their loss was the gain of someone uniqually special...oligarchs, jews (or kleptojews), and politicians. Meet the new boss, same as the old boss.
What happened in China is damned near equivalent to everyone on EBT deciding to invest their annual EBT payments into Wall Street and watching them fall to nothing....and still have no food, electric, water, home...
This shitshow is far from over. There will be consequences in China and the rest of the world. This sort of shit isn't free.
I'm not paying for their mistakes.
It would be nice to get the Chinks out of the US housing market.
There will be NO social unrest due to the Chinese Stock Market collapsing..al those fruit selling/day traders will keep on selling fruit, all those bored housewives will keep on being bored housewives. It's wishful thinking on the part of the people in the west, especially Obama and his masters, that the people in either China or Russia will start a revolt. It's not gonna happen Barry, try another method.
My house price has fallen many times over the past ten years (and risen many times too) but hey, guess what, it's still my house, I still live there, nothings changed. I bought a nice oak table five years ago, it's probably worth now less than half what I paid for it, I'm not about to go out and burn down the nearest government office though...it still can function as a table, which is what I bought it for in the first place.
Get a fuckin' grip of yourself, if people can afford to Gamble on stocks, shares, investing in houses to resell at a higher price, putting 50k bet on whose gonna win next years Superbowl, then they can afford to lose that money, and if they can't then more fool them, they deserve to lose it all to teach them a lesson, fuck 'em.
I think that with millions of new accounts being added ...the china stock market should be called the "china lotto market".. Now that the grand prize has been awarded (those who sold earlier) ..the masses are trying to sell their lotto tickets (stocks)...but the market does not see the value in a used ticket.
I should have listened to my mother on buying something I did not understand..what!!!! my mother co-signed the house to get money to buy into the china stock (lotto) market...
They are starting to cut back the tours from China here in Thailand. not sure what is happening.....
Pehaps they just don't like Thailand any more, hot, humid, full of mosies.....just musing, lol
Maybe they are going to Fiji?
No. Appetite for twisted lust exactly correlates with making easy money. The main attraction for Chinese in Thailand is the ladyboys, they've told me many times.
Sum Ting Wong
Sum Dum Li
Yu Fuk King Ho, Get Sum Mo #2, make shit sammich, eat fo week
As was once sent to me unexpectedly across an army secure link teletype:
Life is like a shit sandwich.
The more bread you have,
The less shit you have to eat...
USG knew Obama was the perfect fascist fall-guy - aus Hawaii
All I will say is this.
My sisters were born in Hawaii in 1962 and 1963.
I was there as the oldest of four and remember welcoming them home. (1959 kid)
I have copies of my sisters original birth certificates. They look nothing like Obama's 'official' birth certificate.
That said, all anyone has to do is pull a birth certificate on any average no body in born in Hawaii at that time and compare it to Obama's.
No one has done that, so everything we've been fed is complete bullshit on multiple levels.
We left Hawaii in 1965...I think this year, my wife and I will have our second vacation in our lifetime in Oahu to check the old neighborhood out. According to my sisters, there's not much left that I would recognize. The buddist shrine in the basement is gone, the pineapple field on the north side is gone, teh C&H sugar factory is no longer visible down the hill (if it's there at all), and there is no view down to Pearl Harbor anymore. And the street doesn't end in a Hawaiian village of destitute native Hawaiians any longer. (I guess they're no anonymous homeless people today. As a kid, there was absolute, total, love and acceptance by Hawaiian natives. They were/are some of the nicest people on earth. And we, the US, fucked them over. Didn't kno that then, was just a happy kid runnig free all over the neighborhood.
***fuck, gunshot just went off next door. Have to go check.***
Neighbor kid, 30+, just suicided it looks lke, in the back yard. Cops on the way. Small caliber from the sound of it, .22 most likely.
Kid made his 'living' at flea markets. Had episodes in the past of going a bit nuts. Protective of the nieghborhood, once freaked when I opened a car door at 2 am. Thought I was a burgler. His dad had to come out and calm him down. Waiting on the cops. I know, I'm quick back here but I don't want to be in the middle of intimate personal drama. It's shitty and the family doesn't need my ass in the way.
While the bubble is inflating people get the true joy of Capitalism.
Making money while doing nothing.
Markets are irrational and have been since Tulip Mania in 1600's Holland.
Do not look for rational explanations, the prospect of easy money turns human beings into gibbering idiots.
Stocks, house prices, <yet another asset type> are going up in value.
I have heard of someone who has made lots of money, I want in.
I am making money, I need to borrow money to carry on investing and make more money.
Gibber, gibber, gibber ....................................
The bubbles burst; I am going to be ruined.
No more gibbering, till next time.
Tulip bulbs ...... gibber ....... the new internet .... gibber .... sub-prime ..... gibber ..... property ..... gibber ..... social media ..... gibber ..... Apple .... gibber ..... pharmaceuticals .... gibber .... emerging markets .... gibber ..... silicon valley start-ups ...... gibber ..... gibber gibber gibber gibber
Maybe Flibberty-Gibbit comes from one of the Stock Crashes.
Makes sense. lol
Once again, the collapse is already in progress, and accelerating.
Buckle up.
2-3 Months I guess is the call.
I had called for a stock market collapse or currency collapse for April 2015... just to follow up on a previous prediction for Apr 2013 by someone else. I'm not an expert.
What I thought I saw in 2008 was commodities move lower, then International Municipals Funds & Index ETFs went Lower, so I got out of what I was doing.
- This year we heard Billionaires have pulled money out of Stocks
- And we heard that Mutual Funds had some weakness with institutional Investors like last week.
And we know Bonds are like 8-10 Times the value of Stocks.
So would guess first a Stock Collapse, then a Bond Collapse... maybe they call that a Sovereign Debt Crisis.
Now my brain isn't working.
- HE-LOCs are phasing into Repayment Phase in the USA
- FED is going to roll over some LT UST to fund the new Budget
- Lots of People talking about Municipal Debt and Unfunded Pensions
- Greece, PIIGS, China (land of no financial ratings), Porto Rico, ME Conflicts, Ukraine Broke,, BRIICS Markets and Trade, Latin American Trade down due to high USD
- Sub Prime Loans
- More Global Recession & US Outsourcing
- Inflation in Drug Testing, USDA work,
- Govt & Private Executive Compensation Inflation
- Inflation Education, Housing, Local taxes, Insurance, Health Insurance, Banking Fees, Bail-Ins,
- Still no Risk free way to earn Interest in Savings in the USA after like 15 Years(Opportunity Cost)
Chicom is Chigone.
the wealth effect for working class Chinese is not the same as it is for US workers. the Chinese consumer hasn't arrived yet. housing is an industry problem, and now China is making prefabs, using 3D printing techniques, i believe they will soon be exporting homes to america, where the cost of housing is probably twice as much on average. the american housing industry hasnt kept up with manufacturing technology, they still do things the same way they did fifty years ago. most contractors disparage prefab, then they hire mexicans who have no understanding of geometry to do the work. the american housing industry is where autos were in the 70s when japanese cars started to cut into the market, to compete with big gas guzzling american cars, which were poorly made. and if Asians have one common financial attribute its direct intervention in markets. as long as there is a market in america which the chinese can enter with cheaper and better products they will continue to fill that role.
Like Chinese drywall?
Very few outsiders participate in the Chinese stock market, therefore it should be a zero-sum game. There is NO NET change in wealth in China. Just a transfer of wealth from one group (the lucky ones) to another (the unlucky ones), which the givernment can correct at anytime it wants buy refilling the banks' and creditors' coffers for free. Quit shitting in your pants you ZH crowd.