This page has been archived and commenting is disabled.

Chinese Stocks Open Down Hard As PBOC Strengthens Yuan By Most Since 2010 & Default Risk Hits 2-Year High

Tyler Durden's picture




 

From the moment Japan opened, USDJPY buying took off (standard 100 pip rip on absolutely no news whatsoever) as yet another manipulated market breathed new life into equity longs dreams. That 'help' combined with the fact that, as SCMP's George Chen reports, 50 China brokerages will jointly contribute 100 bln RMB capital to the government margin finance agency to start "new round of market rescue" provided some stability after US markets' collapse. However, tonight's big news appears to be a major crackdown on leverage as MNI notes regulators ordering brokerage houses to clear all non-official margin trading services - not just halting new clients but also closing existing accounts. Chinese stocks are opening modestly lower as PBOC fixes Yuan stronger for the 4th day in a row. Finally, China credit risk has spiked to 2-year highs as traders increase positions dramatically. The manipulation will continue through tomorrow at least when Parade Week peaks, so buckle up.

 

Japan "rescued"... "Mysterious"? - Large USD/JPY Buyer Seen Before Nikkei Index Opened: Traders

 

China "Stability?"

 

Though some weakness at the Chinese open:

  • *FTSE CHINA A50 SEPT. FUTURES DROP 0.7% IN SINGAPORE
  • *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 2.2% TO 2,939.8

 

  • *SHANGHAI COMPOSITE INDEX SET TO OPEN 4.4% LOWER

And then PBOC Strengthens Yuan:

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3619 AGAINST U.S. DOLLAR
  • *CHINA RAISES YUAN REFERENCE RATE FOR FOURTH DAY

And loses controil of money markets:

  • *CHINA OVERNIGHT MONEY-MARKET RATE RISES 18 BPS TO 2%

 

This is the biggest 4-day strengthening in 5 years!

But tonight's big news appears be a major clampdown on margin trading (as MNI reports),

China's stock market regulator has issued a circular ordering brokerage houses to clear all non-official margin trading services jointly provided with a third party -- not just halting new clients but also closing existing accounts.

 

Chinese brokerage houses were allowed to offer margin trading services in 2010 but strong stock market performance since last year saw many third parties also providing margin trading services with help from brokerage houses. Beijing realized the potential threat of these fast-growing margin trading services, particularly unofficial ones, and started to push for market deleveraging in late-June this year, contributing to the stock market rout which saw Shanghai Composite Index lose nearly 40% since.

Even as margin debt drops to a fresh 9-month low...

  • *SHANGHAI MARGIN DEBT BALANCE FALLS FOR 11TH STRAIGHT DAY

 

The very same brokerages that are seeing executives detained and are being told to shut down margin trading have also provided funds for rescuing the government market...

Chinese brokerage houses are providing more funds to the China Securities Finance Corp for stock market intervention.

 

Many listed brokerage houses issued statements last night saying they were giving no more than 20% of their net assets to CSFC, which will use the money to set up a special account for investment in blue chip stocks. These firms include CITIC Securities, which said it's giving another CNY5.4 billion to CSFC. CITIC Securities is at the center of a regulatory storm as many of its senior executives are being investigated by police and Chinese investors have been questioning if CITIC was a key player among short sellers that caused the recent stock market rout.

 

Besides CITIC, several other brokerage houses which are contributing new funds to CSFC, have also said they are being investigated by the stock market regulator.

Followed by more talk..

  • *CHINA EXPORTS MAY RISE 2% IN 2015; IMPORTS SEEN DOWN 10%: NEWS
  • *CHINA HAS ROOM FOR FURTHER RATES, RRR CUTS: SECURITIES NEWS
  • *CHINA SHOULD MAKE FUND TO SUPPORT SMALL CO. MARKET-ORIENTED: LI
  • *CHINA PREMIER LI KEQIANG COMMENTS ON 60B YUAN SMALL CO. FUND

Then - now that China is flush with cash again apparently, it decided to help out Venezuela...

  • *VENEZUELA SIGNS $5B LOAN W/CHINA TO BOOST OIL PRODUCTION:MADURO

But, not everyone is happy, as Bloomberg reports,

China-focused hedge funds probably had their worst month in almost 16 years in August, with firms including Orchid Asia Group Management and APS Asset Management Pte suffering losses from the nation’s stock market collapse.

 

“Greater China hedge funds are on track to show the worst three month returns in at least a decade,” said Mohammad Hassan, an analyst with Eurekahedge in Singapore. “It’s not a surprise given the funds’ limited ability to short the stock markets in China.”

And finally, it appears traders are hedging China credit risk in size...

Open positions in China’s credit-default swaps increased by 212 contracts to 9,444 in the week ended Aug. 28, according to latest data from DTCC.

 

 

 

That’s the biggest increase among global sovereign CDS; gross notional amount rose $1.31b last week

 

 

Among Asian sovereigns, South Korea’s CDS had second-biggest increase in positions last week, with outstanding amount up 137 contracts, or $1.10b in gross notional value

Charts: Bloomberg

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 09/01/2015 - 21:27 | 6498107 prefan4200
prefan4200's picture

"Major clampdown on margin trading" yet "Chinese stocks are opening modestly lower".   Sure.  That makes about as much sense as anything else happening lately.

Tue, 09/01/2015 - 21:42 | 6498153 markmotive
markmotive's picture

Welcome to the real deflationary collapse.

Gail Tverberg, Nicole Foss, Ugo Bardi:

http://www.planbeconomics.com/2015/09/collapse-cafe-gail-tverberg-nicole...

Tue, 09/01/2015 - 22:50 | 6498346 cougar_w
cougar_w's picture

I really enjoyed that series. And Nicole Foss is scary is hell to listen to. Brilliant -- but scary as hell.

Wed, 09/02/2015 - 00:08 | 6498498 Mintcoin
Mintcoin's picture

This market has been turned into a tax system. You pay into, but you can't get back out. Sounds like a tax to me. Chinese tax market. Wake up!

Wed, 09/02/2015 - 00:54 | 6498528 matermaker
matermaker's picture

if the yen hits 22, you and i both know it's over.   i'm cool with sooner or later... but let us not mince math.

Wed, 09/02/2015 - 03:42 | 6498717 pretty bird
pretty bird's picture

The great China myth is finally imploding.  I can't believe Peter Schiff thought they could decouple.  King Dolla is here to stay.  Suck on it, Schiff.

Tue, 09/01/2015 - 21:51 | 6498186 matermaker
matermaker's picture

Makes perfect sense.  The Chinese got woken up in the morning without any lube or reach around.   The dollar and yen are now being seen as the culprits.   They will retaliate.  It's as simple as that.

Tue, 09/01/2015 - 21:54 | 6498196 matermaker
matermaker's picture

Bet you a tomato that there will be a massive Treasury dump by open and the Chinese will do their own version of stock buy backs.

Tue, 09/01/2015 - 22:15 | 6498242 matermaker
matermaker's picture

I mean seriously... this is a VERY old nation that culled half it's people just a couple generations ago on principle.  They're just trying to remain politically correct.  As AC/DC worte, "who owns who?"  they certainly own a shitload of the worlds debt.  They have the EMs by the balls and buy all their stuff.  We buy everything from them.   About the only thing between them and world domination is nuclear warheads and disenfranchised arabs.  YU GOT PLAD RAZY WOUND EYE!

Tue, 09/01/2015 - 22:17 | 6498260 Handful of Dust
Handful of Dust's picture

Strengthening their currency is a smart move; let the market do its thing but keep your currency strong.

 

All things are difficult before they are easy.

 

~ Old Chineee Proverb

Tue, 09/01/2015 - 22:20 | 6498269 matermaker
matermaker's picture

Exactly.  If you're going to short anyone in particuliar, short apple and walmart.  'cause margins are about to tank.

Tue, 09/01/2015 - 22:32 | 6498299 ThroxxOfVron
ThroxxOfVron's picture

Might wanna short some US Treasuries, too for good measure...

Tue, 09/01/2015 - 23:29 | 6498436 Mentaliusanything
Mentaliusanything's picture

Or anything Canadian - but the talking heads say its all behind them and there is light ahead.

For what reason is it behind them ?

or anything in the other hole digger - ie;- Australia GDP .. if it wasn't for three Warships purchases on the books it would have been -1.8

BTFD? no thanks

Tue, 09/01/2015 - 22:37 | 6498314 matermaker
matermaker's picture

There are precious few cards the US can play, here.  One is to try and destablize China.  I pray we understand that there is well over a billion people that would love a boogey man to hate, and not try that.  When they see Japan helping us, that dog just won't hunt.   We have about zero manufacturing capacity, anymore.  So, begging the EMs to keep being our friends won't work.  Fuck you pay me, comes to mind.    We could try and destabilize the middle east, but that won't work because China already has a lock on Russia, Iran, what's left of Chavez's outhouse and a few others.  Plenty enough to supply it and let the rest descend into chaos.

 

That leaves us with the wild card.  Europe.   This dick swinging contest really comes down to Europe.  They pretty much don't buy crap from us, anyway.. hell we don't make anything anymore.  Chances are we are done for our turn as the cock of the walk.  I don't see the US as going batshit crazy and using M.A.D for an economical defense.  The guys with their fingers on the trigger aren't the psychopaths at the top.   By the way, studies show that psychopaths are about 5% of the population.  And if I'm wrong?  what do I have to worry about?

Tue, 09/01/2015 - 22:41 | 6498324 Jack Burton
Jack Burton's picture

" destablize China "

Bingo! You nailed it right there. Today Washington announced the possible economic sanctions moving to the Chinese space after repeated claims of foul play in Hacking US interests by China. To hear the USA  calling for sanctions now, with a full blown sanctions war already unway on Russia? It takes balls to begin economic sanctions on China, but there it is! Already this day the calls and threats were made, if China does not respect US demands, then they will be sanctioned. So YES, this hacking thing is just cover, cover for sanctions to destabilze China! Nice catch there by the way!

Tue, 09/01/2015 - 22:44 | 6498334 matermaker
matermaker's picture

nah jack... you can tell your drug dealer that he's sanctioned all you want.  it's not going to work for you.  we can do it to little countries where we can make up for it elsewhere.

Tue, 09/01/2015 - 22:50 | 6498345 Wahooo
Wahooo's picture

Sanctions are the new tariffs.

Tue, 09/01/2015 - 22:41 | 6498325 matermaker
matermaker's picture

They are trying so hard to use Ukraine, again.   But as the guns fall silent in the east, all they can do is throw grenades around Kiev.  Folks get tired of fighting after a while..

Tue, 09/01/2015 - 23:06 | 6498383 matermaker
matermaker's picture

When you look at  things from a military point of view.  Draw a line from Russia, down through Turkey, across Syria, Iran and maybe parts of Iraq.  Track back towards inner Asia.   Everything is either calm or now having Russian troops or Eastern influence introduced.  Go west of that line and it's chaos.  What does the west have?  A chaotic eastern middle east, Africa and South America.  Expensive tar sands and fracking.  HOWEVER,  I will say this.   The west has always been good about pulling new technology out of their ass as game changers.  THE WORLD HAS ALWAYS BEEN RUN ON RESOURCES AND ENERGY.  I can not emphasize that enough.   The west still produces most of the food.   Hell, I wouldn't be surprised if Hitler's gold train actually had some brand new way of thinking about things.  I so often hear folks being so anti semite up on here.   Don't bitch about the guy who figured out how to fuck you.  Don't get fucked so easily.

Tue, 09/01/2015 - 23:49 | 6498466 Mintcoin
Mintcoin's picture

Paid disinfo agent provocateur shills. Don't believe all the comments on ZH are genuine honest. When you start getting close to the truth, you find the greatest lies.

Tue, 09/01/2015 - 23:54 | 6498474 matermaker
matermaker's picture

cat's out of the bag, not so bitcoin... yen to the moon!

Tue, 09/01/2015 - 23:58 | 6498482 matermaker
matermaker's picture

oh shit... am i the man who just sold the world...

Wed, 09/02/2015 - 00:07 | 6498496 matermaker
matermaker's picture

it's funny when you think about it.....   ZH is a place where the most powerful folks in the world go constantly to listen to what a shoe shine boy has to say.

Wed, 09/02/2015 - 00:14 | 6498503 matermaker
matermaker's picture

what's a matter?   i watched the S&P go lockstep with the Yen trade?   Probaly the only thing the PBOC doesn't own... You afraid they will buy Japan?

Wed, 09/02/2015 - 00:31 | 6498519 matermaker
matermaker's picture

it's a bidding war, isn't it?  if China ramps up the Yen overnight?   the S&P will crash.   If Japan fights to the death, well....China wins.

Wed, 09/02/2015 - 02:25 | 6498624 MSimon
MSimon's picture

The US has zero manufacturing capacity?

 

Second largest mfg. capacity in the world. It is why we are doing reshoring.

 

Your world view does not accord with reality. That will lead to mistakes.

Tue, 09/01/2015 - 23:40 | 6498452 matermaker
matermaker's picture

It's funny. I just realized, though I have no idea what the numbers are.  I bet China owns VERY LITTLE Japanese FX.  probably mostly out of spite.  They are probably doing everything in their power to reverse this, at the moment.  Nobody is getting raped like they are.

Tue, 09/01/2015 - 23:44 | 6498461 matermaker
matermaker's picture

I'd love to see them sell treasuries and bid yen into nosebleed levels.

Wed, 09/02/2015 - 02:32 | 6498633 MSimon
MSimon's picture

I have no idea what the numbers are.

 

Yep. You believe the second largest manufacturing power in the world has zero manufacturing.

 

There was a time when Japan was going to take over the world with manufacturing. And then their economy cratered. China is on the same track. For the same reasons.

Tue, 09/01/2015 - 21:52 | 6498192 JimBowie1958
JimBowie1958's picture

If one annot sell stocks and take profits, then how does one make profits trading stocks in China?

Oh, wait, I get it; it is the way of operating communist stock markets!

Tue, 09/01/2015 - 21:54 | 6498200 matermaker
matermaker's picture

They own all our debt and make all our shit, surely there is a connection.

Tue, 09/01/2015 - 22:16 | 6498258 itchy166
itchy166's picture

Borrow with your portfolio as collateral and default. 

Tue, 09/01/2015 - 21:27 | 6498108 JungleCat
JungleCat's picture

Stwong is wong?

Tue, 09/01/2015 - 21:28 | 6498110 ebworthen
ebworthen's picture

Digital Dreams!  Send me my check already you sand-baggers!

What's good for markets is good for consumers!  Right!?

Tue, 09/01/2015 - 21:31 | 6498117 nmewn
nmewn's picture

Ramming speed Mr.Sulu, full reverse, take em in the stern!

All puns & double entendres are intended ;-)

Tue, 09/01/2015 - 23:02 | 6498369 Hulk
Hulk's picture

Beware of Aliens bearing photon torpedoe Butt plugs !!!

Tue, 09/01/2015 - 21:32 | 6498120 docinthehouse
docinthehouse's picture

Hope ya'll get the hell out while you can!

Buy a van and tent, some water pills, fire starting junk and a great crossbow....

Then head for San Francisco.  :)

"Are you goin' to San Fran Cisco"

Be sure to wear some flowers in your hair.....

Hope all these manipulators wind up eaten by the alligators they mess with.

Tue, 09/01/2015 - 21:33 | 6498122 DirkDiggler11
DirkDiggler11's picture

No big action in China until next week. Japan in the other hand is going full retard, and more dangerous than a 2 yr old with a hammer. They "bought" a green open for the NIKKI to start trading tonight, but my money says they end very much in the red by the close. Going to be ugly tonight...

Cue the drunk and passed out Japanese trader on the subway car ...

Tue, 09/01/2015 - 21:37 | 6498133 khnum
khnum's picture

I think you'd need a good dose of whatever killed River Pheonix to explain Japan pre-market activities today

Tue, 09/01/2015 - 22:01 | 6498222 matermaker
matermaker's picture

I'll give it a shot.  Japan is Fukishima'd.   Getting really old.  Her only pleasure is through touching her own central bank.  This bitch China came along and took Uncle Sam for a ride.  Now Sam is totally whipped by this bitch.  No way out.   Maybe, just maybe... if Japan fluffs Sam one last time, He'll taker her back and stop China from stomping her skank ass.

Tue, 09/01/2015 - 22:40 | 6498320 ThroxxOfVron
ThroxxOfVron's picture

Old girlfriend is, well -old.  Reliable, clean and intelligent but getting a bit frumpy.

New girlfriend is a totally untrustforthy backstabbing gold-digging ho -but still perky and will do stupid nasty crazy.

It's not a tough choice if you think with little head.

Even big head has a tough time with this conundrum...

Tue, 09/01/2015 - 21:34 | 6498123 docinthehouse
docinthehouse's picture

Hey

Is that Anonabox compatible with the internet?  ZH?

I am sure it has a direct connect port to NSA!

Tue, 09/01/2015 - 21:36 | 6498131 gwar5
gwar5's picture

They didn't arrest the right journalists or enough journalists last time. Can't spell moar without Mao.

Tue, 09/01/2015 - 21:47 | 6498175 Bunga Bunga
Bunga Bunga's picture

Roll in the tanks!

Tue, 09/01/2015 - 21:55 | 6498201 gwar5
gwar5's picture

Chinese APCs = armored personnel crushers

Tue, 09/01/2015 - 21:38 | 6498136 ZombieHuntclub
ZombieHuntclub's picture

call me when some stuff gets set on fire and a bunch of people turn over some cars and stuff. The doom porn is getting old. Nothing ever happens. 

Tue, 09/01/2015 - 21:46 | 6498174 DeadFred
DeadFred's picture

I would say this is the most exciting "nothing-ever-happens" market I've seen in years. But that's just my opinion.

Tue, 09/01/2015 - 21:49 | 6498180 gwar5
gwar5's picture

I know what you mean, ZHC. But we did have three massive explosions in China with hundreds killed and rockin and rollin stock markets last two weeks. Smells like something is happending and not teen spirit.

 

 

Tue, 09/01/2015 - 21:42 | 6498152 ghostzapper
ghostzapper's picture

Come on, for old times sake . . . . Bring back that chart showing new retail brokerage accounts in China.

Never gets old laughing at that one laid on the SHCOMP and margin debt.

Tue, 09/01/2015 - 21:43 | 6498157 Boomberg
Boomberg's picture

The thought just occurred to me that this whole financial thing is really a shitty way for humans to live on this planet. 

Tue, 09/01/2015 - 22:56 | 6498354 cougar_w
cougar_w's picture

Go ahead and roll imperial capitalism in there while you are at it. 

Tue, 09/01/2015 - 21:43 | 6498159 Gab Timov
Gab Timov's picture

Well...there's a few of things working against China's attempts to make their exports less expensive to other countries, mainly in the US, since that's where I live.

 

1.) Made in USA movement...while not supported by the globalist plutocorporatorcracy controlled US media, is still a real thing.

2.) US consumers do not have a whole lot of extra money to spend on non-necessities, thanks to that magical non-inflationary inflated rent, groceries, utilities, Obozocare, etc.

3.) The market has been flooded with Chinese goods for several decades now. Many of the products are cheapo, poor quality. In other cases, people already have enough material stuff for a while.

 

That's just my two Yuan though.

Tue, 09/01/2015 - 21:50 | 6498183 khnum
khnum's picture

the US is going to pay for the currency wars and strong dollar soon enough the aussie dollar has lost 25 per cent and the Canadian 20 per cent against the greenback,lots of companies like Amazon have up to 40 per cent of their sales overseas these days,soon those sales are going to tank.

Tue, 09/01/2015 - 22:44 | 6498333 Wahooo
Wahooo's picture

I have never purchased a Chinese made product that I thought was of high quality.

Tue, 09/01/2015 - 23:28 | 6498432 Antifaschistische
Antifaschistische's picture

First we filled our houses with this crap

Then, we filled our garages

Then, the basements and attics..

soon after, we moved to the storage units.

Then, we move to larger storage units......are you suggesting we are at peak storage?

Tue, 09/01/2015 - 21:44 | 6498166 richiebaby
richiebaby's picture

Brack Swan

Tue, 09/01/2015 - 21:49 | 6498177 matermaker
matermaker's picture

You're crazy if you think the Chinese won't take this as the dollar and yen ganging up on them.

Tue, 09/01/2015 - 21:51 | 6498188 CHC
CHC's picture

Well - it looks like the Chinese leaders have everything under control.  OMG!

Tue, 09/01/2015 - 22:00 | 6498216 Tsar Pointless
Tsar Pointless's picture

You are here: Currency war.

On deck: Shooting war.

Tue, 09/01/2015 - 22:01 | 6498224 DaVinci
DaVinci's picture

We give too much credence to the manipulated stock market.

Tue, 09/01/2015 - 22:15 | 6498256 FreedomGuy
FreedomGuy's picture

All sellers will be sent to economic reeducation camps. They have been newly refurbished from the Mao days. 

Tue, 09/01/2015 - 23:03 | 6498374 Stormtrooper
Stormtrooper's picture

Yeah, they have outhouses now.

Wed, 09/02/2015 - 00:00 | 6498487 Mintcoin
Mintcoin's picture

Think of it as a tax. Forced to buy, not allowed to sell. Call it what it is, a tax market.

Tue, 09/01/2015 - 22:18 | 6498262 Haole
Haole's picture

Chinese version of a Nantucket Sleighride, none of this smells of Sun Tzu in the least...

Tue, 09/01/2015 - 22:26 | 6498285 ThroxxOfVron
ThroxxOfVron's picture

"regulators ordering brokerage houses to clear all non-official margin trading services - not just halting new clients but also closing existing accounts "

 

WTF!   Does 'clear ALL non-official margin trading accounts' mean what it sounds like it means?

Margin Call on EVERYONE in China???!

They are completely INSANE if they think that will do anything but crash the system...

 

 

Tue, 09/01/2015 - 22:34 | 6498300 Ms No
Ms No's picture

Maybe they will sell 400b in UST by Tuesday.  Happy Wabor Day round eye!

Tue, 09/01/2015 - 22:59 | 6498360 laomei
laomei's picture

fuck china, buy more YANG

Tue, 09/01/2015 - 23:09 | 6498391 TheAntiProgressive
TheAntiProgressive's picture

I love "free markets".  Call out the troops and make them buy, buy, buy!!!!.

Wed, 09/02/2015 - 01:44 | 6498586 hedgiex
hedgiex's picture

Real danger lies in China PBOC losing its credibility. Losing the creditability in managing their Stock Market is incosequential to their Real Economy. Now that PBOC is tinkering with its currency is a different matter...far more potent for them and global markets. It is all getting more exicting in the paper markets with all the smokes and mirrors. Casinos are now kindergarten playgrounds.

Wed, 09/02/2015 - 02:51 | 6498648 MSimon
MSimon's picture

China lowers the Yuan to make exports more competitive. Then raises the yuan because?

 

China encourages margin debt to boost stocks. Then does a huge margin call.

 

Does any one get the idea that they have no clue? Because their policy seems to have no other basis than the great leader's whim of the moment.

 

It is possible to do some business when policy is wrong but generally consistent. It is impossible to do business when policy is crazy.

 

Which leads to the conclusion that China is destroying its own business. Clever? Or stupid? Or just malice?

 

It is unwise to attribute to malice alone that which can be attributed to malice and stupidity.
Simon's Law

 

Reminds me of the last days of Stalin in the USSR. Or the last days of the USSR.

Thu, 09/03/2015 - 08:53 | 6503776 Max Steel
Max Steel's picture

These charts showing the "plunge" and "crash" are all zoomed in microscopically close. Look at charts on a long term POV and this current situation is a sensible correction, and a much smaller one than 2007-2009.

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{%22range%22:%22max%22,%22allowChartStacking%22:true}

http://finance.yahoo.com/echarts?s=^HSI+Interactive#{%22range%22:%22max%22,%22allowChartStacking%22:true}

The Chinese stock market is right where it should be.

keep drinking the zh koolaid on china dumbo  

Do NOT follow this link or you will be banned from the site!