This Could Be Very Bad News Ahead Of China's Open Tonight

Tyler Durden's picture

Earlier today we explained why far from supporting the stock market, all the Chinese RRR cut did was offset already used funds to support currency intervention following the August 11 devaluation: the one sentence from SocGen that put it in perspective was tthe following: "In perspective, the PBoC may have sold more official FX reserves than this amount since the currency regime change on 11 August."

Hence, the RRR cut was a retroactive move, not at all proactive as the market's initial euphoria indicated.

Which, ahead of China's close tonight, could be very bad news for those hoping for a rebound in China's Shanghai Composite which as a reminder closed below 3000 for the first time since its bubble runup which started last July.

Here, according to Bloomberg, is the reason why:

China halts intervention in stock market so far this week as policy makers debate merits of an unprecedented government campaign to prop up share prices and what to do next, according to people familiar with situation.


Some leaders support argument that stock market is too small relative to broader economy to cause crisis, says one of the people, who asked not to be identified as deliberations are private.


Leaders also believe intervention is too costly, person says.


Those who back intervention argue that market meltdown could pose danger because banks offer wealth-management products tied to market performance, people say.


Government’s current priority is success of military parade set for Sept. 3 in Beijing commemorating end of World War II, people say.


China Securities Regulatory Commission doesn’t immediately respond to faxed request for comment.

So if the liquidity from the RRR had been already used up, and if China will not step in to prop up stocks, what will?

And why is China doing this? The FT had an interesting theory earlier today:

The China-led turmoil that has rocked global markets in the past two weeks has also shaken the ruling Communist party and left Li Keqiang, the prime minister, fighting for his political future, according to analysts and people familiar with the internal workings of the party.


Among party officials and politically connected people in Beijing, the hottest topic of conversation is whether Mr Li will take the fall for Beijing’s perceived mismanagement of the stock market crash and the country’s broader economic slowdown.


“Premier Li’s position has certainly become more precarious as a result of the current crisis,” said Willy Lam, an expert on Chinese politics at the Chinese University of Hong Kong. “If the situation worsens and if there comes a point where [President Xi Jinping] really needs a scapegoat, then Li fits the bill.”


* * *  


Mr Li is already regarded by most analysts and political insiders as the country’s weakest premier in decades, thanks largely to Mr Xi’s aggressive concentration of power in his own hands.


Mr Li was once thought to be the most likely candidate to replace former President Hu Jintao, before he was instead anointed as Mr Xi’s number two in 2012.


The premier is regarded as a leading member of the faction centred on Mr Hu, known as the Communist Youth League group. But Ling Jihua, one of the most prominent members of that faction and Mr Hu’s former personal aide, was arrested earlier this year on Mr Xi’s orders on charges of corruption and abuse of power.


* * *


“In any other country facing such a big crisis you would see senior officials coming out to reassure the public, but since early July no Chinese political heavyweight has come out to say what’s going on or what the government plans to do about it,” said Mr Lam. “This has fuelled speculation that there are real divisions at the apex of the party.”

Maybe Li rubbed Xi the wrong way, maybe Xi just wants to put one of his own people in the premier's shoes, maybe the two just don't see eye to eye, whatever the reason, what matters is that Xi now has an "out" from the whole market mess: his prime minister, whom he can hand over to the furious masses to deal with as they see fit, thus washing his hands of the whole Chinese epic stock market bubble pop and moving to bigger and better bubbles.

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OldPhart's picture

China's next import bubble will be women.  Lots and lots of women.

Maybe that's why they've stock-piled all that cash and bling...

jcaz's picture

The short version-  "We're broke".

clooney_art's picture

Liquidation of all US treasury holdings by China coming up next.  Get ready for higher interest rates automatically due to that, while the Federal Reserve will look like the buffoons that they really are. !!!!

Leopold B. Scotch's picture

Gold into attractive chinese women?  Modern alchemy!

Urban Redneck's picture

Not yet.  Fear trade will drive people into UST to mute any short term price impact of current bond holders looking for bag holders for when TSHTF.

xcehn's picture

and into sudden heavy drinking as the crisis should warrant:

" A woman was stopped at Beijing Capital International Airport for trying to carry a bottle of cognac worth £120 on the plane. Faced with either having to throw the whole bottle away or drinking the contents, she opted for the latter. The woman, surnamed Zhao, downed the entire thing at around noon, because she didn't want to waste the bottle of Rémy Martin XO Excellence that she had purchased at a US airport earlier on her journey."

dot_bust's picture

It makes me wonder whether the Chinese government popped their own stock market bubble so they'd have an excuse to dump Teasuries.

It's just  a hypothesis.

NoVa's picture

it is a very smart hypothesis.  Equities risk-off, Treasuries rally

Bush Baby's picture

Jesus , if China shits the bed again tonite....

zorba THE GREEK's picture

Chinese leadership should have intervened when the Shanghi Market was being overbought

and foreseen the damage that would be done when the market inevitably corrected to a more

realistic level.

humble_man's picture

I'm long Chinese women (since I married one). Count me in on that bubble......highly recommended. 

SWRichmond's picture

I'm not touching that one...

techpreist's picture

I'm in on that one too. Faithful, smart, hard-working, and gorgeous!

Tarjan's picture

Me too. Wonderful lady.

Implied Violins's picture

I've heard there are American woman dating ads on all the main Chinese websites...

pacu44's picture

Men to women ratio in CHINA 70/30.... They will need to import women or follow King Longshanks strategy in Scotland...

Jugdish787's picture

You know what they use for rubbers??  A contact lens...and a bandaid.

KnuckleDragger-X's picture

Somebody needs to translate "Charge of the light brigade" into Chinese......

Apostate2's picture

Qing qibing jinji...

You're on your own for the rest.

Fred Garvin's picture

You don't know who is swimming naked until the tide goes out


Bay of Pigs's picture

The smell of doom is in the air.

davidalan1's picture
This Could Be Bad News Ahead Of China's Open Tonight: 

Ya think?

Sudden Debt's picture

To expensive? Somebody should have told that to the Fed 20 trillion dollars ago!

Tsar Pointless's picture

Conversation overheard in China today:

Li: Xi?

Xi: Li?

Li: Si!

Si: What?

ThroxxOfVron's picture

The Party core, the princelings, and the politically connected neo-captialists have been bought out with fresh phony fiat: so intervention is no longer deemed necessary and/or 'too costly'.

The peasants are just prawn to be shelled to the politiburo bosses, and shelled and served like prawn they shall be.

bania's picture

Wi Tu Lo, China's equivalent of Kevin Henry, will be working tomorrow. Markets will be on fire.

I woke up's picture

At least they have their priorities in order on making sure the military parade is a success

aliki's picture

and this could be very bad for those hunting "safe yield" in dividend stocks:

Transocean to propose cancellation of third and fourth installments of dividend; Co was previously paying a $0.15/quarter dividend (12.20 -0.06)

I Write Code's picture

Really, I mean seriously, how did they think they could run a stock market with chopsticks?

Deadratsplat's picture

When the dead cat bounce stops, I want to coin the phrase first for the "new normal" Dead rat splat. ( and then I am headed over to Gartman's house with party favors and a ball gag!

gatorengineer's picture

I think DOW 15K gets taken out tomorrow at least intraday......

Dickweed Wang's picture

I think DOW 15K gets taken out tomorrow at least intraday......

How about 14K by Friday's close with the REAL panic starting on Monday the 31st?

Gambit's picture

That would be awesome in a scary way!

Baa baa's picture

Won't happen, they will shutter the doors and unplug the servers before yielding to reality.

Mark Urbo's picture

Maybe at that point "they" won't be able to monkey hammer gold down any longer ?

Rathmullan's picture

well yes, except that all ccp officials own shares in the SSE or in companies that would like to go public on the SSE. Nonetheless I am encouraged that the ccp didn't insist on holding 3000 last night - which means the new line in the sand is likely 2500 which translates into under $90 for appl and its criminal "tipper" ceo.

stantheman's picture

I come to Zerohedge to get my daily dose of depression. Blogging one negative article after another. 

You guys should replace your tagline to "Get your daily dose of depression" or something like that.

Dickweed Wang's picture

I come to Zerohedge to get my daily dose of depression.

Welcome to a semblance of the real world pal . . . . is it any wonder many times what you get on ZH is never reported on the MSM outlets - particularly the financial ones like CNBS and Bloomturd  . . . .

stantheman's picture

Real world == depressing news over and over again. That's great. 

stantheman's picture

Actually nothign to do with a real world. Just a place for all the market shorters to get together and find as much negative news as possible. Not doctored news but real I agree. But this is like the Facebook for shorts and people looking for their daily dose of depression. 

Bernoulli's picture

It's exactly the contrary. Daily dose of sanity. But why am I bothering...

davidalan1's picture

He needs a "I contributed trophy"

Nobody For President's picture

Exactly Bernoulli.

BTW, your theory is why I'm a pilot...

I mean, WTF we gonna do, listen to/watch CNBC, read Bloomberg or Yahoo Finance or any of the other sell side cheerleaders. I watched Cramer Once - I cannot believe people watch this idiot entertainer cum market analyst, or whatever the hell he purports to be, but apparently a lot of people do watch him, and not for entertainment.

Thank goodness for ZH and Misch and George Washington and the rest for a daily dose of sanity. And you, Saint Bernoulli, and knucks and the rest here for both sanity and entertainment.

Solio's picture

So what's the problem?

Pop, light up, or pour something!

Tomorrow is another day!

Until it's not.