A modestly positive open in China quickly turned negative as regulators un-halted 408 more stocks, reducing the number suspended to just 36% of all stocks. Along with disappointing trade data (and expectations of "extreme pressure in the next 2-3 months") and regulators cracking down on investors with multiple illegally-obtained margin trading accounts [5], early strength has faded (for now). Unsurprisingly, the three regions with the most exposure to the crash in stocks are Shanghai, Shenzhen, and Guangdong and, as Bloomberg notes, Chinese police have found their scapegoat some trading companies may have manipulated stock futures (lower we assume, as manipulating a price higher appears to be policy). Stocks are mixed with high beta ChiNext and Shenzhen higher and Shanghai and the CSI-300 lower (the latter having gone nowhere for the last 2 days).
The 24% explosion off the lows is stalling...
[6]
Shanghai, Shenzhen, and Guangdong dominate the nation's equity maket exposure
[7]
Source: @KangHexin
Scapegoats are being lined up... (as Bloomberg reports)
China police investigation team led by Vice Minister of Public Security Meng Qingfeng found signs some trading cos. may have manipulated stock futures, Xinhua reported, without saying where it got the information.
The team visited China Securities Regulatory Commission head office Thursday morning to investigate what it called “malicious short-selling of stocks and stock indices”: Xinhua
The team arrived in Shanghai Friday to continue the probe
And regulators are attempting to manage the multiple margin accounts problems (as Xinhua reports [8])...
China's securities watchdog announced on Sunday that it will crack down on illicit securities trading so that the market can recover steadily.
"Some institutional or individual investors hold 'virtual' securities accounts or trade with borrowed accounts. As real-name registration is required by the law, this illicit conduct may damage other investors' legitimate interests," said the China Securities Regulatory Commission (CSRC).
The commission asked local authorities to verify the authenticity of securities accounts and be more strict when supervising them.
Institutional and individual investors will be prohibited from lending their accounts to each other.
The CSRC said it will clamp down on any illicit conduct in accordance with the law, and will transfer violators to the police.
"Free" markets...
- *NUMBER OF CHINA TRADING HALTS DROPS TO 36% OF OVERALL LISTINGS
- *NUMBER OF CHINA TRADING HALTS DROPS BY 408 TO 1,045 VS FRIDAY
Trade data suggests extremely weak foreign and domestic demand...
- *CHINA 1H EXPORTS RISE 0.9% Y/Y IN YUAN
- *CHINA 1H IMPORTS FALL 15.5% Y/Y IN YUAN
- *CHINA 1H TRADE SURPLUS 1.61T YUAN
- *PRESSURE ON EXPORTS RELATIVELY SEVERE IN NEXT 2-3 MOS: HUANG
And perhaps hints of what is to come...
- *NOT EASY FOR CHINA EXPORTS TO KEEP RISING AS YUAN STRONG: HUANG
QE?
* * *
