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Chinese Stocks Rise After Government Injects $100bn Into Sovereign (Rescue) Fund; Sell-off 'Blame' Shifts To Hong Kong
Despite the reassurances from western media and talking heads that China is unimportant (both its stock market and economy), Asian economies continue to show signs of contagion from China's slowdown as Thai exports weaken and Hong Kong trade tumbles. But it is the blame game that is top of mind tonight as Chinese regulators switch attention to Hong Kong brokers in their "investigation into malicious sellers." As SCMP's George Chen notes, first they blame a "foreign force," and now they blame Hong Kong, always careful not to blame themselves. After 3 down days, Chinese stocks look are opening slightly higher as there is little follow-through from yesterday's PPT rescue or today's panic-buying in US markets especilaly in light of an additional $100bn injection into the sovereign (rescue) fund.
Just throw another 100bn at it...
BREAKING: Chinese Gov injects US$100B to sovereign fund's direct investment subsidiary to buy assets abroad - Caixin pic.twitter.com/Y3OzOUfBEv
— George Chen (@george_chen) July 29, 2015
As a reminder, China closed on the weaker side overnight...
But it appears the PPT save overnight and extension through the US session is not helping China at the open...
- *CHINA'S CSI 300 STOCK-INDEX FUTURES LITTLE CHANGED AT 3,683
Update: Buying pressure arrived shortly after the open ..
- *CHINA'S CSI 300 INDEX SET TO OPEN UP 0.8% TO 3,839.96
- *CHINA SHANGHAI COMPOSITE SET TO OPEN UP 0.7% TO 3,689.82
Not exactly the follow-through they would have hoped for...
But here is the chart everyone is looking at...
* * *
As SCMP's George Chen explains, blame continues to project outward...
Though as we saw yesterday,. any strength is being used by locals to sell (not short) into government strength as one farmer exclaimed - fighting back tears, "I have have ruined my entire family... I will nevere touch stocks again."
* * *
Furthermore, while Western media continues to stress how unimportant Chinese stocks (and the Chinese economy now apparently) is to US stocks and the US economy... it is, as Gavekal Capital explains, crucially important and more evidence is building of a slowing Chinese economy permeating the rest of Asia...
Today’s edition of our diary of weak Asian economic stats focuses on the recently released trade and industrial production numbers out of Thailand and the trade numbers from Hong Kong. The Thai economy is feeling the pain of the Chinese slowdown acutely even in the most high level economic statistics.
Meanwhile the Hong Kong trade figures, which we view more as a proxy for Chinese trade given its intermediary port position connecting China with the rest of the world...
...paint the picture of the weakest trade by volume since 2013.
* * *
But apart from that - everything is awesome judging by US equities.
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I'm not sure I think the opening sentence of this article is on the right track.
Sure, western media outlets are saying that the Chinese stock market is unimportant. Or so I assume, since I don't actually waste any time at all listening to them-- but am willing to accept this as a reasonable premise.
But China exercises the strictest form of coercion on foreign media reportage regarding its affairs. Anybody who deviates from the accepted line finds their website blocked and their visas revoked.
So it is safe to assume that it is CHINA'S policy to downplay the importance of its stock market difficulties and the sellout toadies are merely doing as they are told.
Ergo, we have to recognize that CHINA is deeply worried about this and willing to crack the whip on its foreign procurators just as much as it is doing to its family farmers.
Throwing more paper into the fire. The underground leverage bubble is too large not to burst.
Sounds reassuring.
Maybe I'll buy some more banana/monkey/not run by jew bankster or communist scumbag stawks...
Booyah!
whether the market goes up or done matters less now.... it will go precisely where the broader economy needs it to.
the far bigger impact is the lost trust and good will in the Chinese 'markets' ... even by western standards, the level of manipulation is enough to make Draghi and Bernanke blush.
The last time China had an unrest problem, it used soldiers from agricultural areas to repress the rioting citizens in the streets.
Will the citizens now be willing to repress their perhaps-soon-to-be-rioting agricultural cousins?
That is the real question. The CCPs base is in the countryside and it has now wrecked the lives of its most perfervid supporters.
I would guess that the CCP would not be averse to shovelling out its entire fx stockpile to make these people whole, or at least content, once again.
Of course it will try everything else first, but their cause will be quickly lost if the country folks withdraw their support from the central government.
Ouch... the pain trade.
Risk off, and traders shorting the ponzi usd/jpy trade.
Meanwhile the metals and commodities are going bid. It could be some EOM profit taking.
We'll see if we get some "follow thru". ;-)
They threw all those $billions at it and it's still slightly down in the morning session.
Why would anyone ever buy again if you are threatened for selling? Talk about illiquid.
There's a gun pointed at their head telling them to go all in and margin to the hilt.
Sounds like the leadership is coming unglued - they're going to start killing people over this shit. Damn.
Just like the Cos injecting those helpless women
Malicious-selling farmers that already lost everything. Shame on them. /s
fake markets are a great way to keep people poor and enslaved, its worked for the fed for a century.
No Legal Right...... LOL....
Therein lies the problem.
It would appear that the main players can do as they please, and make up, or disregard rules along the way.
While everyone is "making money", not one person really cares too much why the market is going up, up, and UUUUUPPPPPPPPPP!!!!!!
For example, during the Clinton years, I did not care too much, for guess what, I was too busy "making money."
As I went through dot com losses, housing bubble losses, unfortunate things happen in life losses, I slowly began TO care, and not just about myself.
The reason for caring is because it became quite clear that if something happened to Johnny Whomever way the on the other side of the world, what is to prevent that chain of events from biting me "over here"?
Nothing.
Zh is ok for a brief look see but its getting too commercial, trump, making iran look bad etc... I will still keep it as my quick look, but I am moving on now... I came here for some economic news, but now its getting like mainstream media. If I want to know other things I can go to infowars, and natural news, .....for instance, instead of talking about the zionist controlled trump, or jenner, etc, I would expect zero hedge to post articles such as the following...I bet if zero hedge posted things such as the following there would be more comments...I wonder what ZH'ers think about this economic wonder
http://www.sacbee.com/news/politics-government/capitol-alert/article2915...
Here's a good one that's 'spot on'
http://www.zerohedge.com/news/2015-07-21/chinas-record-dumping-us-treasu...
And anouther just plug it into google maps (MH370)
12° 5' 20.87"N 104° 9' 6.80"E
Chow Baby
They are pumping the brakes and attempting to frighten the mouthbreathers into staying long. They are going to let it down slowly, opening the door so the Party members can offload inventory, then slamming it again and wagging a finger in the face of the Laobaishin.
The Chinese Communist Party is the largest criminal organization in the history of humanity.
second largest...but I am sure if they keep trying maybe they can be first.
George Chen is a dead man...price on his head
The timing seems strange.
Chinese are looking to internationalize their currency,
They (with Russia) offer a potential solution to Greece which could allow them to default on their EU debt and start again with the backing of the new Asian Infrastructure Investment Bank, which in a way would have been good for both Greece and China/Russia as they could have started new investment in a good stratigic location between China/EU with a debt free country (ie right after Greece defaults).
Literally the day,, Greece vote 60% no to Trioka policy, Chinese stocks start to crash, Russia/China get cold feet about supporting Greece and the Greeks are forced to do a 180 and accept and awful.. deal.
We keep seeing the same pattern.. The large out of control debts globally are US (18.5 trill ) Japan 11 trill
and the EY 16 trll .
all with debt to GDP above 100 % Japan above 200% it cant be paid back they cant handle any rate rise..
the debt has to be restructured but every time the FED looks at raising rates we get a new crisis (2012 Greece explodes) 2015 Greece expodes again but this time Russia/China provide an alternative then surprise Russia currency explodes (earlier ) then China stocks expldoe higher and crash down .
I wouldnt be surprised if dollar backed forces drove China stocks up then down.. causing the destabalisation..
So the FED will have to go on hold and globally better rush to US/JapanEU debt (the fact they are the largest and completely out of control) doesnt matter markets capital is being herded there.
China Govt debt to GDP is 38%.. foreign reserves of 3.7 trill (most in world next is jpn with 1.2trill)
US debt to GDP is 100% foreign reserves 120 bill (no19 in world)
look at the heat map on public debt. the brown (above 100%) is US/Jpn/and souther EU.
it were entering the twilight where the countries that have the most debt and in US case least reserves (foreign reserves includes gold) are suppose to be the most valuable with lowest interest rates.
Its only via the type of manipulation as we saw prob out of HK on China markets that the illusion that the low debt high reserve coutries are risking.. and the high debt in US case low reserves are safe.
Yes China may have problems... and need to restructure.. but the govt debt and reserve situation is ok so they can allow private sector liquidation..as a means of resolution.
The wesk knows if China makes its currency convertable and sets up development bank to rival IMF/world bank it will have a huge change on influence on who controls things financially so their trying to keep China off balance.
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_rese...
> China Govt debt to GDP is 38%..
Lol. Stopped reading there. You actually think the state-run banks, with political bosses, aren't the government's debt stooges. When the time comes for them to be bailed out, the chinese peasantry and its life savings will insure that bank liabilities becomes gov debt.
Like 90 million people in the thing, we're talking about a thing that 6~7% of the population was dicking around with. It's not as big a deal as you'd think.
The Chinese expansion was on the back of large exports / trade surplus and yes private sector borrowings, but the govt doesnt have an internation bond liquid bond market. Which is good when your borrowing but bad when you have to pay it back.
look at the heat map US/EU/Jpn Govts are broke not only cant they afford to 1) go to war (see US now using Saudi/Turkey to fight in middle east)
They wont be able to bail out banks ect next time (ie bail ins)
China is in much better shape as you woudl expect from large exporter (see Germany vs Greece)
The US army is the only thing holding it up at the moment..
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
I agree its all optics, it just puts Govt under pressure and possible stoped any greek nagotiations going through and gives Fed another excuse.. ie its not the 18.5 trill debt ..its China.. Greece ie anything but the fact the Govt cant pay its debt at anything but zero..
Funny thing to see that their government keeps injecting money to, say, "protect" the stock market but actually with the hope of getting out with more money.
The government will definitely ban this Chen guy for good in media source simply because this guy's mouth is full of s**t like every Chinese so-called "economist", however without respect for the government
Upcoming Chinese Financial Headline: Aliens ( Etraterrestial ) trying to invade Communist China and cause the stock market to dip. All loyal chinese civilians must buy stocks to fight for the existence of mankind on planet Earth.
I blame the greedy illiterated chinese sheep.
Like bootlegging DVD's, learning the intricacies of US bubble blowing and preventing their inevitable collapse is a fine art. The FED is schooling them, it takes time. The Chinese thought they could bootleg a stawk murket as easily as a DVD.
That's the sovereign wealth fund that has just been funded, not the stock market rescue fund.
This may be part of a "sterilized invention".
International Finance 101
Investors wish to exit China assets, so they must at some point sell yuan for say USD. To keep the yuan stable, the CCB sells USD reserves (it has lots!) in order to soak up the now excess yuan hitting the FOREX market (or wherever the trades are being made). The recently reported drop in official USD reserves supports this theory.
That was the intervention. However, all of this yuan selling by investors leaves CCB flush with yuan - and the country now low on yuan and this yuan shortage triggers an economic slowdown (which started maybe a year ago). To prevent a recession the central bank needs to inject all those purchased yuan back into the hands of the private sector. This is the "sterilization". There are many ways to do this (tax cuts, govt spending on projects, etc.). There is also QE in the form of buying now cheap(er) stock. Since the govt. in 2014 started encouraging people to invest in the market they possibly feel the moral obligation to help these now suffering investors. They have a lot of yuan to do it with, yuan that needs to be injected back into the economy anyway.
If all of the above is accurate then one can possibly ascribe China's economic malaise on the capital flight. The lost capital is now being restored and may within a year put the economy back on its earlier path.