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Is The Chinese Stock Market About To Crash?

Tyler Durden's picture


"The eternal optimists would have us all believe that China will awaken from its slumbers amid a blaze of new, debt-fuelled spending initiatives and so buy up all the goods we find so hard to sell at home (without offering a substantial concession in price)" is how Sean Corrigan begins his assault on the non-reality that is China's 'save-the-world' protagonists. It is worth noting, however, that those who actually invest in the place seem to be too busy selling their equities to pay much attention to the Panglossians and Polyannas. With a 10% slump in the past 12 sessions in the main indices (retracing a major fib interval of the 2012 rally), there seems little enthusiasm there for clinging on in the hope that the PBOC will bail anyone out - and the wedge is closing on something big in the chart. Plain vanilla economics might well be correct in telling the bulls that they may rely on a Zhou Xiaochuan Put to spare them too much future pain, but the law of the political jungle, red in flag, tooth, and claw, may well dictate otherwise. As we write, it seems beyond dispute to say that the Chinese hierarchy is battling it out behind closed doors to determine the long term future of the regime and, by implication, the direction of the entire nation. In such momentous times, we would perhaps be foolish to think that the routine application of short?term countercyclical policy will bear overmuch weight in their counsels. Simply out, there is too much political infighting for any large-scale action to be taken as "Having moved against the state-capitalist left of old man Jiang and his Chongqing bruisers, surely the last thing Hu & Co. would want in their final months in office would be to unleash another oligarch?enriching orgy of speculation of the kind such a mass stimulus would be almost bound to foment."



Anecdotal evidence continues to belie the highly suspect official statistics upon which so many blind macromancers routinely base their case. Growth in Shanghai port traffic has slowed to a virtual crawl – under 4% YOY – as have rail freight ton?miles ? a sub?5% increase in the first two months which is less than half the trend rate from before the crisis – while electricity use for the first two months (unseasonably cold ones full of residential heating demand, at that) was only 6.7% above the like period in 2011, the smallest increment (excluding the Crash itself) in a decade.

Then we had the salutary revelation that the CCP has not, after all, managed to suspend the working of the same economic laws which are crushing Europe – i.e., they have not been able to order away the effects of a monetary dearth which is steadily eating away at the shaky foundations erected during an earlier glut and sizzling through the overextended balance sheets this spawned with the vigour of fluoroantimonic acid.

Thus, when the NBS announced that the trajectory of larger firm revenues had decelerated sharply from the 30% YOY rise of HI?2011 to February’s 13.4% (the slowest, ex?crisis, in a decade), we might have guessed that profits would fall 5.2% YOY (fall!)– a far cry from the earlier period’s growth in the high?20s. More worryingly, accounts receivable and finished product inventories were also both up 18% ? swelling faster than sales and so implying negative cash flow prevails across the board. Negative cash flow means that even such profits as there may be are more a virtual artefact of accounting convention than the sort of filthy lucre you can actually spend.

Even this does not tell the whole story, for while expanding production volumes and an administered price hike helped both oil & gas and the utility industries improve their tallies (if not, for the first of these, anything like as rapidly as before) and if agriculture also benefited from higher prices, by contrast, chemicals, metals processing, machinery and equipment making, and electronics and communications all saw income shrinking – to the point of extinction for the nation’s steel makers who are responsible for half the planet’s output.


Even if we dismiss the wilder rumours swirling about the offshore websites and the fringes of the blogosphere, it is painfully clear that something very unusual and potentially disruptive is afoot. Given our overdependence on the myth, as much as on the reality, of a China rising inexorably and uninterruptedly to a resource?hungry world primacy over the next decade or two, the interplay of factional political infighting with potential economic meltdown could be the defining influence on the world’s affairs in general, much less on the enthusiasms of those active in its financial market playground, in the coming months.


Chart: Bloomberg


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Fri, 03/30/2012 - 13:59 | 2304197 francis_sawyer
francis_sawyer's picture


Fri, 03/30/2012 - 14:08 | 2304238 blu
blu's picture

Too bad they don't have any oil reserves. Hey I know, someone in Tibet should fake something up. It worked with WMDs ...

Fri, 03/30/2012 - 18:34 | 2305131 DorseyCecil68669
DorseyCecil68669's picture

my friend's aunt makes $72/hr on the internet. She has been without work for six months but last month her payment was $19183 just working on the internet for a few hours. Here's the site to read more .....  http://lazycash9.com

Fri, 03/30/2012 - 19:43 | 2305283 economics9698
economics9698's picture

Tyler get rid of this shit.  Fucking sucks.

Sat, 03/31/2012 - 10:31 | 2306175 tooktheredpill
tooktheredpill's picture

scary thing is that some people actually fall for this. They don't even try to make it sound kosher.


Shibor from 3M on all going down for some time now

Sun, 04/01/2012 - 10:45 | 2307539 rosiescenario
rosiescenario's picture

I think I saw her .... the site was Mature Sluts Bend Over....she should have been paying the viewers...

Fri, 03/30/2012 - 19:56 | 2305305 Buck Johnson
Buck Johnson's picture

China is becoming the Black Swan that people didn't expect.  I wonder if Jim Rogers is still taking his own advice and investing in China, or is he getting out while he can.  No one's buying and China has been lying about  her economy, pure and simple.

Fri, 03/30/2012 - 14:11 | 2304245 slewie the pi-rat
slewie the pi-rat's picture
BRICS summit shadowed by Tibet protests - Yahoo! News From Yahoo! News: The leaders of the emerging world gather Thursday in India to discuss the creation of a new development bank at a summit shadowed by protests by ...

"the word is out....all ooo-ver town,..."

Fri, 03/30/2012 - 14:27 | 2304297 Iwanttoknow
Iwanttoknow's picture

Is that from your computer terminal at langley?

Fri, 03/30/2012 - 14:36 | 2304337 slewie the pi-rat
slewie the pi-rat's picture

no, this is:


Fri, 03/30/2012 - 15:53 | 2304621 WhiteNight123129
WhiteNight123129's picture

Free Texas, Kyle Bass at the department of Treasury of the newly created country, Ron Paul as president of this new country.

Fri, 03/30/2012 - 17:54 | 2305034 B-rock
B-rock's picture

Free Tibet*

*with a $10 purchase

Fri, 03/30/2012 - 15:07 | 2304447 Carl Spackler
Carl Spackler's picture

If this thing breaks support, Tibet may be free after all...as in without costing much.



Sun, 04/01/2012 - 10:46 | 2307540 rosiescenario
rosiescenario's picture


Fri, 03/30/2012 - 14:43 | 2304198 GeneMarchbanks
GeneMarchbanks's picture

'As we write, it seems beyond dispute to say that the Chinese hierarchy is battling it out behind closed doors to determine the long term future of the regime and, by implication, the direction of the entire nation. In such momentous times, we would perhaps be foolish to think that the routine application of short?'


Um, yeah.

Perhaps they are so involved that even the guy who is their equivalent of Brian Sack has been sidelined momentarily.

Fri, 03/30/2012 - 14:01 | 2304205 Tsar Pointless
Tsar Pointless's picture

Quick answer:


Equity markets are not allowed to crash.

Slow grinds downward, perhaps. But no crashes.

Fri, 03/30/2012 - 14:35 | 2304333 5880
5880's picture

Never fade Chanos



Sat, 03/31/2012 - 10:33 | 2306178 tooktheredpill
tooktheredpill's picture

get a grip little miss sunshine

Fri, 03/30/2012 - 14:01 | 2304208 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Crash?  The Chinese equity markets have been underperforming oter equity markets for years.  If anything is going to "crash" it's US equity.  China doesn't have a lot left to lose, considering they have not made much of a comeback from the '08 lows.

Fri, 03/30/2012 - 14:08 | 2304236 chinaboy
chinaboy's picture

For my own account, I have been waiting for a good crash to buy. 2200 is like a middle of no where. I hope the market gets down to an insane low that way I can buy with assured profit.

Fri, 03/30/2012 - 14:15 | 2304256 Schmuck Raker
Schmuck Raker's picture

"Assured profit", the Loch Ness Dragon of finance.

Fri, 03/30/2012 - 18:05 | 2305067 oldman
oldman's picture

@Mr. Lennon

Maybe so---I don't know, but I keep wondering-------

If you have a machine whose own trades are 80% of the volume and it plays both sides, effectively washing out all losses(same account, right?), and places the retail/small institutional trader's buys and sells where it wants in a nano-second nano-price differential universe, how long can the party last?

Because it only has to pay operational expenses for itself which are infintissimal compared to the virtual market it has created, I think it can last until it actually has to go for funds from the public and -----there are no funds. This might be decades, but at least as long as it has to roll all its debt a time or two, moving out further in maturity each time until there is no way to fund it.

In the meantime, it cuts social services, defense a tad here and there, and increases taxes.

Mr. Lennon, sir, I don't know anything about how all of this shit functions. This is just what I fear and take away after watching this machine in action for the last year or so---it gets more aggressive day-by-day and says 'Fuck you" quite loudly as time passes. If you will, please, refute the above and put an oldman's mind at ease.

Or anyone else who understands what I am so incapable of expressing more coherently, please, help out on this            om                     

Fri, 03/30/2012 - 14:01 | 2304210 CvlDobd
CvlDobd's picture


You are TPTB public enemy #1. I'm convinced they are out to discredit ZH.

i.e. thanks Swiss bank for 2k gold peak, welcome SP to bear market low. Hell even the AAPL low this morning.

I swear they will now do anything in their power to crank china up hard and fast. 2007 bubble be damned.

Some things are better left unsaid. I'm not saying I disagree or you are wrong, just saying there is an agenda.

Sat, 03/31/2012 - 07:05 | 2305622 i-dog
i-dog's picture


"BUT STOP! You are TPTB public enemy #1. I'm convinced they are out to discredit ZH."

Keep your shirt on!

Firstly, do not assume for a moment that ZH is not a honeypot and overloading us with negative news to induce depression and a feeling of helplessness. I don't know whether it is or isn't, but that is certainly what Alex Jones is ALL about! For example, there are some subjects that the Tylers (and Jones) just will not touch.

Secondly, the commentary of the various Tylers covers quite a spectrum -- which provides plausible deniability that the commentary is one-sided. Golem Sachs and the Morgue get their analysts' opinions placed here daily, often without critical comment. It's good that we get both sides of all stories...to form our own opinions rather than being fed just one theme.

Thirdly, ZH is often discredited -- both in the comment section and on other "alternative" media sites.  I would be concerned if they WEREN'T being discredited!! I doubt that 'Tyler' cares and many of us here don't give a flying fuck what the shills say. The truth eventually becomes obvious -- as 'Tyler' often points out by referring back to accurate predictions made months, or even years, ago.

It is important for 'the Resistance' that as many commenters as possible express their true feelings on ZH about the Criminal Occupation Governments in DC and Brussels, so that casual readers can see just how widespread the dissatisfaction is among the serfs. Without the uncensored truth being exposed and shared, ZH would be 'just another stock pumper'...like Market Watch! :-/

Fri, 03/30/2012 - 14:02 | 2304212 LawsofPhysics
LawsofPhysics's picture

The Chinese "market", just like the people, in this very centrally controlled communist country will do precisely as their leadship wants it to do.

Damn, I just realized this means China actually has leadership.

Fri, 03/30/2012 - 14:03 | 2304216 MFL8240
MFL8240's picture

This must be part of the Zero Hedge Comedy Hour!  The Chinese stock market is a conceren when they have 2 trillion in cash reserves and the US market which is at nosebleed levels is of no concern to the clowns?

Fri, 03/30/2012 - 16:30 | 2304758 Hugh_Jorgan
Hugh_Jorgan's picture

This is ONE article dood. You don't read here much do you?

Fri, 03/30/2012 - 14:04 | 2304220 The worst trader
The worst trader's picture

Captain Ben to the rescue?

Fri, 03/30/2012 - 14:05 | 2304227 blu
blu's picture

Maybe it's just me, but when I eye-ball that chart I see the arrow going sideways rather than down.

But I'll put my ruler in for a tune-up, just in case.

Fri, 03/30/2012 - 14:19 | 2304267 TradingSIZE
TradingSIZE's picture

Wedge Pattern...can break either way with probability of 50/50 typically. More of an illustration showing consolidation and it usually is violent in either direction.

Fri, 03/30/2012 - 15:06 | 2304439 Spastica Rex
Spastica Rex's picture

Boy, if only you could get those odds in Vegas.

Fri, 03/30/2012 - 14:06 | 2304229 swissaustrian
swissaustrian's picture

Does China already have a PPT?

Fri, 03/30/2012 - 14:38 | 2304347 spartan117
spartan117's picture

Yeah. it's called the US Consumer. 

Fri, 03/30/2012 - 15:08 | 2304449 Spastica Rex
Spastica Rex's picture

My EX bank, Bank of America, just sent me a new credit card with a $25K limit. I'm unemployed and my wife is a Catholic school teacher making about $30K/yr.


Fri, 03/30/2012 - 15:26 | 2304491 skipjack
skipjack's picture

Be patriotic - buy American...Smith & Wesson, Remington, Mountain House, and don't forget the iPad for dessert.

Sat, 03/31/2012 - 14:37 | 2306589 LawsofPhysics
LawsofPhysics's picture

Buy lots of physical, get new identities, and then relocate.  It's the "to where" question that becomes a problem.

Fri, 03/30/2012 - 14:06 | 2304232 slewie the pi-rat
slewie the pi-rat's picture

acid, BiCheZ!

Fri, 03/30/2012 - 18:10 | 2305076 oldman
oldman's picture


Nah, slewie,

there's better natural medicine than acid

Talk to the plants

I'm off to the waves for awhile---------------I'm laughing too hard to read more                   om

Fri, 03/30/2012 - 14:07 | 2304235 walküre
walküre's picture

www.chinesekisses.com pops up as advertisement.

Wow, these google ad placement experts or whatever they call themselves have it totally figured out!

Advertising with google is as good as burning cash in your backyard. Man, the money that some companies are wasting on promo bullshit as opposed to paying their people a fair wage is phenomenal. Google is raking it in on nothing but ad hype. That is going to stop very soon and GOOG will get RIMMED.

Fri, 03/30/2012 - 14:57 | 2304423 slewie the pi-rat
slewie the pi-rat's picture

just pretend you're w/ tyler and keep drinking!

Fri, 03/30/2012 - 14:10 | 2304243 SilverTree
SilverTree's picture

God I hope so.

Fri, 03/30/2012 - 14:16 | 2304259 Praetorian Guard
Praetorian Guard's picture

I have been dealing with Chinese manufacturers as of late for small initial orders. You would be suprised of the amount of MAJOR Chinese manufacturers who have contacted me to fill such small orders - when I say small, I mean small! I believe that the Chinese manufacturing industry is suffering BIG TIME and desperate.

Sat, 03/31/2012 - 04:16 | 2305925 meatbag
meatbag's picture

No, in fact what is happening is the opposite.   Manfacturers in China are trying to cut-out the traditional middle man broker.   It has now become a badge of honor of sorts for factories to attempt to sell direct.   The factories are shooing themselves in the foot as they are accepting these small orders at a loss all for the sake of trying to eliminate the few percentage that a aggregrator used to make.   I think they are doing it mostly for pride at this point.  I suspect it will not last.  However, if they are successful at eliminating the traditonal broker, then they have eliminated a source of competition and can begin to charge you any price they like.  Ultimatly, this is their strategy and this strategy has been advocated by local govermetns and is a form of industral policy.   So far, it has not worked as infighting has quickly broken the cartels.   However, they keep trying and as of recent, I am beginning to see some traction, especially as labor shortage has reduced production capacity.   As for factories hurting, I don't see it.  Thier are more Benz and BWM's in China then I care to count and the cash first comes from the factory operation and then they use the factory cash flow to develop real eastate,which is sold to grandma for cash at a 5x profit, Grandama plans to gift it to her only grandson in 10 years.  Hence all the empty apartments are bought and paid for...

Fri, 03/30/2012 - 14:18 | 2304266 BandGap
BandGap's picture

Wow, think of this news in terms of the current geopolitical situation. China would be hypersensitive to any disruption in oil imports in this scenario, as well. 

Loved the refence to fluoroantimonic acid. Super acid, cuts through almost anything.

Fri, 03/30/2012 - 14:20 | 2304276 meatball
meatball's picture

Chinese don't have much money in their stock market. Real estate, on the other hand...

Fri, 03/30/2012 - 14:22 | 2304278 kralizec
kralizec's picture

ChiCom Market.  Just think about that a sec...

Fri, 03/30/2012 - 14:23 | 2304286 suckerfishzilla
suckerfishzilla's picture

All of their small electrical appliances that wind up here for sale are junk and fall apart in less than 90 days.  Their clothes and shoes suck as well.  Let's hope that they don't have to sell off any of their Gold to make up for any shortfalls in the market. 

Fri, 03/30/2012 - 14:23 | 2304287 BrokeDayTrader
BrokeDayTrader's picture

China property stocks were killed last night, some kind of backroom dealing with officials

Its the beginning of the end, I'm short FXI

Fri, 03/30/2012 - 14:26 | 2304295 campag
campag's picture

ok what was that move in Brent all about in the last hour?


Fri, 03/30/2012 - 17:04 | 2304876 swissaustrian
swissaustrian's picture

End of the quarter window dressing in hedge funds (cta's?)?

By the way, funny fact: US retail diesel prices have a higher correlation with North Sea Brent than with West Texas Intermediate:


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