- *CHINA'S SHANGHAI COMPOSITE INDEX FALLS 0.6% TO 3,687.36 AT OPEN
- *FTSE CHINA A50 INDEX FALLS 2%
Amid the highest level Typhoon warnings, China's stock market continues to storm as only 49% of Chinese stocks are halted (down from 54%) as local analysts fear yesterday's bounce (just like last week's) was nothing but a dead cat bounce: "bounces like today prolong the timeframe to get that final bottom in place." For the 14th day in a row margin balances declined with the pace accelerating (down 10.9% yesterday alone) for a total over 36% decline so far. Seemingly on pain of death, someone is selling Chinese stocks as CSI-300 futures opened a mere 0.2% higher then sold off - no follow through for now. Goldman warned to expect another 30% decline margin balance and concludes, China "hasn't yet fully purged."
In case you're wondering why we bounced yesterday (aside from the death threats to shorts)... It was a very technical bounce off the 200DMA...
and for now there's no follow-through...
Stroms are gathering...
- *CHINA ISSUES HIGHEST-LEVEL ALERT ON TYPHOON CHAN-HOM
As more companies limp out from nehind the curtain of invincibility...
- *NUMBER OF CHINESE COS HALTED FROM TRADING FALLS TO 1,422
- *A TOTAL OF 49% OF CHINESE STOCKS ARE HALTED FROM TRADING (down from 54%)
Goldman noted the suspensions of shares are "really the key issue..."
With a number of stocks suspended - we've had 32 percent of the market cap being suspended - we haven't really had a clearing of price that's fully taken place and the deleveraging which has been going on hasn't yet fully purged
That's really what we're looking for for a sign of a market bottom."
Margin balances continue to plunge in accelerating manner... now down 36% from the highs...
Where is all the margin concentrated (via SCMP) [9]
Goldman also noted margin balances still have a long way to go...
"We think the rough equilibrium level would probably be about a trillion
That would be where the margin balance relative to free float market cap would be commensurate with the level that we've got here in the U.S."
Another 30% reduction in margin balances could happen in the next five days to two weeks
And finally for some context on the week...
Are you going to buy this dip?
* * *
And for those think it's over... it's not...
And for China to get back to 'norms' there is considerably more left...
As one local analyst warned... [15]
"Unfortunately, with bounces like today, this emotional and high-volume trading capitulation doesn't come to fruition. Then add to the mix the fact that half the stocks in China are halted and this bottom becomes harder to achieve," said Brett McGonegal, chief executive of Reorient Group, a Hong Kong-listed investment firm.
"We were almost at the bottom and bounces like today prolong the timeframe to get that bottom in place."
these just get bettter and better pic.twitter.com/m2SnZPviFD [16]
— zerohedge (@zerohedge) July 9, 2015 [17]
Charts: Bloomberg








