What China Has To Look Forward To When It Opens In A Few Hours
It's all up to China tonight, and if early ETF indications are correct, today's US equity bloodbath is about to spill over right back into Chinese markets again, only this time without the benefit of circuit breakers making it an early close for local traders if they manage to push the market down 7% in 29 minutes.
Moments ago, on Bloomberg TV, Bill Gross said China's stock markets are likely to drop 5-6% on Friday: "Based upon the ETF in the United States, China is predicted to be down 5 percent or 6 percent…but China is an artificial market. All global markets are artificially based and to the extent that we have a catharsis, I think, depends upon central banks basically giving up in terms of what they do. I don't think that's going to happen."
Gross is referring to the following ETF:
Indeed, it appears that the US is far more bearish on what will happen in China tonight relative to the local futures market:
Incidentally, when asked whether the market turmoil will cause Chair Yellen to say the rate hike is done, Gross said: "I don't think she'll say that. They've been on this track of raising interest rates for so long that she's not going to come out with one or done. She may come out there -- someone may come out - Fischer perhaps - will come out and acknowledge the fact that global markets and that global financial conditions are an important consideration in terms of future policy. But I don't think they're going to divulge that they are not raising interest rates for times as Stan Fischer said a few days ago."
In other words, central banks to the rescue. Meanwhile...
Angry clients besiege Chinese brokerages
Back in China, which has had non-functioning markets on two of the past four days, should the market rout persist, the already angry local "traders", most of whom are undereducated and margined to the hilt, will likely snap.
According to Bloomberg, after yesterday's farce, angry clients besieged a brokerage as China's market crashed and was halted.
“We cannot go home. We are dealing with a flood of angry phone calls from clients complaining about the market plunge and the circuit-breaker system,” says Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. Wei added that “we are also feeling at a loss and confused today as we didn’t quite figure out what was going on."
Wei also says that Huaxi management "has asked us to placate clients and guide them to cut holdings rationally if they do margin trading."
Sorry, but when clients have not only lost a year's worth of income in minutes but on top of that can't liquidate the remainder, no amount of placating will work.
Wei then explained what even the Chinese regulator realized after the first few days of experimenting with the new circuit breaker: "the circuit-breaker mechanism actually fuels declines and that goes against the regulator’s goal of stabilizing the market." It remains to be seen if removing the circuit breaker, a device by definition meant to stabilize markets, will lead to calmer markets. Maybe for the first few minutes, but then all bets are off.
"The new rule on major shareholders’ stock sales isn’t going to work to prevent the market from falling. It’s restricting sales and the CSRC cannot do things like banning them from selling forever. It’ll be a tough day again tomorrow."
The circuit breaker has been removed, but we feel it will be just as tough tomorrow, or rather, when China opens in a few hours.
In the US, traders are "too old for this"
It's not just Chinese traders. According to another Bloomberg report, US traders "can't afford to sleep" during what is becoming a nightly rout, starting just around 8:30pm Eastern.
With China’s stock market in disarray, American investors are finding out just how long their day can last -- before they even get to work.
"This morning when I rolled over in my bed at 4 a.m. to check the markets and saw what happened in China and in U.S. futures I thought, ‘Oh, here we go,’” said Howard Ward, who oversees $42.7 billion as the chief investment officer of growth equities at Gamco Investors Inc. "I’m getting too old for this."
It's a cowboy market
“If it’s somebody who really doesn’t know a lot about China, this is kind of scary. They say, ‘Oh my god, their market can drop 7 percent,’” said Nick Sargen, who helps manage $46.2 billion as chief economist and senior investment adviser for Fort Washington Investment Advisors Inc. “The reason I can be more calm about it is that I follow that market, I can say, listen it’s a cowboy market.”
Bloomberg concludes by saying that "night owls have been rewarded for at least a year as China’s influence moved action in U.S. stocks to hours when exchanges were closed. In 2015, shares in the S&P 500 swung more during off hours than their small-cap brethren for the first time in at least 15 years."
So far this year, the only privilege night owls have had is to watch as China loses control of its market on half the trading days so far.
* * *
So what happens tonight? Keep an eye on the Yuan fixing around 8 pm: if the USDCNY sees another substantial jump (i.e., Yuan decline) from last night's 5 year low rate of 6.5646, this could suggest further turbulence and as all self-fulfilling prophecies go, unleash another pukefest which not even the circuit breaker adjustment will fix. It will also mean that unless the Chinese plunge protection team aka the "National Team" throws everything it has at the stock market, the Shanghai Composite could fall first 5%, then 7%, and then not stop but simply keep falling until someone finally does step in.
In short: it will all be about a central bank rescue again.
But for now either go load up on coffee, or take a nap. It will be a long night.
(18 votes)
»
- Login or register to post comments
- Printer-friendly version
- Send to friend
- advertisements -
Another Halting..? Markets so good you HAVE to use them.
Physicals are where its out. Promises from liars are, like, soo 2008.
RIPS
This is going to be fun. I might actually open up one of my personalized bottles of Gentleman Jack and sip and short more stocks like a dwarf at a midget orgy during this session tonight.
Got lube?
I’d ‘like to order some Chinese food from China’s PPT... ;-)
Looney
gonna go down in a braze of grory.
Bear Sterns is fine.
I do remember Jim Cwamer telling me so. :)
I bought in. But an hour later I had to buy in again.
Better to be long fortune cookies and VIX.
A little early now, but let's hope this shit keeps going to the point where nail gun suicides of financial zombies takes on epic proportions.
Tomorrow? - what's chinese for 'capitulation'?
GORD!!!!!!!!!!!!!!
There are Chinks in the IMF armor.
Cramer's OK. I'm a subscriber. In 2009 he sais GET OUT!! nunless you have a 5 year horizom. Good?
Circuit breakers are only for matured rigged markets.
China needs to learn the hard way...
They need to learn how to break their markets...
When the MSM expects it to go down a lot , I think everyone is going to be pissed about the fireworks come US close. Expect the opposite of what the squares believe. It is a pity squares are bears for the next 21 hours. I sure hope the public is right on this one, but just seen this way too long.
On a short term basis thats fine.
But looking at the cycle and all...
I don't expect much to happen tonight. BUT.... folks will have all weekend to freak out. Sunday night could be real scary!
....since Lehman-san.
I don't think I understood about that Chinese analyst's name. Was Wei Wei his name or what he would do when the market opened?
I was thinking dookie. A really big dookie.
Count Dooku ?
European and I'm a Putin
Hee Hee Hee Haw Haw
john, sip one for me but imfo sit tight and relax. maybe step out and piss in the wind and think how nice it is to be free of these markets, ahhhh, yea, ahhhh...
If my long term options on the put side hit that magic 1820ish on the S&P, my dick will be so hard IT will be typing online this month.
Sell your stax and get day trading! You could make a small fortune!!!
When I can trade faster than a HFT bot I will consider day trading, until then, I will acquire more phyz. I've never had a computer jump line in front of me at my local coin shop...
How do you make a small fortune day trading? Start with a large fortune.
For me it's a night smoking some reef at a fun local watering hole deep in Costa Rica... with WiFi of course.
Top it off with some Chinese carnage asada tacos.
burn one for me :)...(I don't live in Colorado)
The Chinese have always been corrupt. While wanting to appear legitimate, they scheme behind the scenes.
I doubt the PPT will be very far away from the switches the entire night, whether there's a circuit breaker or not.
Market makers need to have an orderly market. So everything is marked down 7%, trade 100 shares and close the market. Rinse and repeat until no one wants to sell.
How can you quote someone with a name WEE WEE?
Financial instruments aren't a place where you get rich.
They are what you do with your fortune once you have decided not to enjoy it.
People who buy financial instruments to try and get rich just get billed fees.
Soon to a theater near you...
The Halting
with Jack Nickleson as TPTB
and Shelly DeValue as The Muppets
appearance by Scatman Coversall as disaooeared tycoon
Terror, suspense, thrills and a happy ending!
And with Jean Repo as The PPT.
My only regret is that I have been drinking rum since 3:00 PM EST and I will probably pass out
before the carnage begins.
What's your favorite rum?
Red Cap from Dominica.
That sugar cane rum will fuck you up.
Trust me, my wife and an attendant had to drag me out of a volcanic hot tub at the resort from 8 fruit punch drniks.
I could have sworn I saw big titted black women molesting me. Or was that CPR?
Zorba, I've been on good California wine since 1400 PST, after the market closed and I toted up my winnings, but I AM gonna keep it together for tomorrow morning, a lot is on the line.
https://finance.yahoo.com/portfolio/pf_3
https://finance.yahoo.com/q?s=000001.SS
Do they pay the workers by the hour over there? If not, this is a pretty sweet deal for the average Zhou working at the "market". He works a few hours each day before the whole thing shits the bed. Then he goes home, smashes a big bowl of rice down his gullet and gives the wife the old pickle tickle. Not bad work if you can get it!
pickle tickle ?????
A League of Their Own
I congratulate China for having the good sense to suspend the circuit breakers.
Bravo!
Now they can blame the evil speculators and foreign devils when the collapse begins in earnest.
I apoligize...I have to watch CNBC at 7PM Eastern and watch this special shit show. I am in Las Vegas at the Consumer Electronics show. It is NOT as busy as past years, and this stock shit show is the talk. Especially since all of this garbage is made over there (China). What time (Pacific) does the China collapse start?
The Chicom's start trading at 8:30 Eastern time, so I believe that puts it at 5:30 PM your time if you're in Vegas.
"Another Halting..? Markets so good you HAVE to use them."
Oooo...me so HALTY !
I wonder if Mr. Yellen has booked a red eye to China for the "Plunge Protection Team" ?
Total shit show gone bad!