Is China Trying To (Slowly) Burst Another Stock Market Bubble?

Tyler Durden's picture

The pressure point in Asian stock markets this week has been the decline in Chinese equities (the biggest weekly drop in 4 months).

Despite a stellar performance of the economy the outlook for the Shanghai Composite Index isn’t promising as the government is taking advantage of better growth to spur deleveraging.

For a market relying more on liquidity than fundamentals, China’s worsening monetary conditions index suggests tough times ahead...

 

As a reminder, the Shanghai Composite Index, notorious for its wild swings over the past two years, has gone 86 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992.

 The last 4 days have highlighted the unusual effect in Chinese stocks.. each time the Shanghai Composite dropped over 1% (red dotted line) it was miraculously lifted to ensure it closed with a loss less than 1%...

 

As Bloomberg reports, authorities favor a steady stock market because it helps companies fund investment and repay debt by issuing new shares, which could help boost economic growth, according to Yin Ming, a vice president at Baptized Capital in Shanghai.

“The national team is behind it,” Yin said. “State funds will likely continue to be a market stabilizer.”

So one wonders, is China desperate to delever the speculative fervor in their markets... but do it just 1% at a time? Can the 'market' really be that well centrally planned? We will see...

If the 6-month lag in Chines commodities is anything to go by, the breakdown in Chinese stocks is nowhere near over...

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Blankfuck's picture

ut oh better print more ponzi paper money and cash in for gold, Thats what the elite did in the usa, Smart huh

zzzz88's picture

buy gold? check the history, it happened in usa. the government can announce it is illeagal to own gold!!!!!!!!!!!!!!!

indygo55's picture

As far as THAT is concerned, this time is definately different. Anyone who has put even 5% of theis assets in gold and silver know the history and the game and they will NEVER give it up You know that as well as the goverment. 

Sick Monkey's picture

If you can litterally get your hands on the yellow stuff it could be used to barter in emergencies but a real useful asset would be some farm land and some equipment to work it along with spare parts. Of course every one else will want the tractor, fuel and parts so a small plot to work by hand will be of more value then anything else even in the long run. Access to usable water and some sort of fuel or energy like a bit of wood or solar would be your second most useful asset. Of course all bets are off in that scenario but I would rather die picking a few of my own crops somewhere off the grid then live years in the 29 soup kitchen line pulling boots off dead men.

Juliette's picture

People will steal the crops from your farmland and then steal the tractor.

 

Arnold's picture

Put aside any size 11 s you find.
Thanks.

zzzz88's picture

we are all fucked by central banks and government, no matter what we do. 

TradingTroll's picture

No one would vote for a politician who didn't offer more goodies (done without disclosing how much debt is being taken on).

wisehiney's picture

Highly deflationary.

roddy6667's picture

Only about 10% of the Chinese citizens are in the stock market, so it is not as big a deal as in the US.

SomethingSomethingDarkSide's picture

USA = China = Japan = EU

All the Central Banks are loading us up onto the Financial Titanic like Federal Reserve opponents.

Prepare to be scuttled for the greater alchemic good!

Yayyyy..

Golden Showers's picture

Lao Tsu: If you think you have popped, perhaps you were a bubble.

Or some shit.

Hey, China! Go suck a dick striaght up!

Hongcha's picture

Look at a longer chart - these indices are well below their peak a few years ago.  Chinese blue chips are a BUY.

ds's picture

In their Ponzi economy coupled with grandiose ambitions (new silk road, etc), the Party is now faced with what threaten its power most...unemployment. They have over promised their People. They need to print even more money to plug all holes that sink zombies (employers) and their stock markets have to be propped for the zombies.

Of course, the agnostic global markets are not impressed and game their currencies and other loop holes knowing their Achiles heel (employment at all costs).

Be on the right side of the deflation that they export through subsidies of exports and dumps. Problem with importing countries are that they are not passing through the deflation to their own People. Don't blame them if your own rent seekers  are creaming their gifts. Are jobs that you want at wages to pay artificial prices OR enjoying susbsidized imports that markets will clear even at lower prices ?

Cheer them on. Markets will clear all economies that are in this "employment games' played by Politicians to retain power, wilth alacrities. The 1% do not trade or invest to support economic ideology (employment) and/or sentiments. Play with PBOC, as you have some advantage in knowing what they fear.

 

 

Sick Monkey's picture

All nations fear the same thing. Loss of control. All humans need the same thing. Food water and shelter. No one has a monopoly on that so in the end after the stupid ones have destroyed themselves borders have no meaning.

Fake Trump's picture

Trump is trying to artificially inflate the stock markets.

peterk's picture

I wouldnt be too worried about the chinese stockmarket , sure they have debt this time around

as do  US EU etc, but  they have a ACE  up their sleeves.. INDUSTRY + WEALTH.

China can pay off any debt overhang following a  market collapse, but  not so the US or EU.

Both PRIVATE and PUBLIC sectors in the US are bankrupt.

Its the  private sector that keep an economy going, and US consumer like Australian consumers, dont have $500 between them (33% dont have 500 in Australia and US).

The banking secor NEEDS DEBT FREE consumers to LOAD up with debt to spur the credit creation process, thats what keep the BUBBLE alive. Failing that you need  the central bank  to take over and keep asset prices  up to

protect those  indebted consumers from  going  bankrupt.

CHINA has more potential to provide  DEBT free consumers, so that market will be good in comparison to

the US and PARTICULARLY AUSTRALIA.

Sick Monkey's picture

Yes but the model is the same. They have bought themselves some time with cheap labour and significantly reduced liability compared to western nations but you cannot get the bull to pull the plow forever. The people will want something in return at some point in time. They need health care, proper sanitation, education and equal opportunity otherwise the youth will rebel. China's Achilles heel is it's huge population. The bottom 90% still have to migrate without education just to eat. Not a sustainible plan even in the long run given projected population growth. Think of population as debt after it's level exceeds managable limits. 

radbug's picture

About bloody time! In Sydney & Melbourne every man and his dog is playing the property market!

venturen's picture

who doesn't love unlimited virtual money....why ever nother to lower the stock market...sky's the limit....ask the dutchboy troll or bearded wonder

gdpetti's picture

Well, duh! Xi recently changed the man in charge of this setup ... wasn't it last week? Time to rein in the corruption in the system before it becomes impossible... good luck with that Xi.