Sinister forces are at work in China’s stock market, according to at least one “non-biased” Hong Kong newspaper.
To be sure, one might well be tempted to suspect that the inevitable unwind of a completely unsustainable (and by many measures, entirely insane) margin mania is to blame for the brutal selling that has, over the course of just three weeks, cost Chinese shares some $3.5 trillion in market value. But you’d be wrong, according to Ming Pao.
Instead, the paper says, the same nefarious speculator who famously broke the BOE now has his sights set on bankrupting illiterate Chinese farmers.
Here’s more (Google translated for your amusement):
George Soros sold short A-share stock market decline to stick to the mainland
Failure to stick to the mainland stock market, the People's Bank's foreign hostile newspapers are suggesting that the initiator of short selling, the market rumors about George Soros and other short-selling A shares participate more rampant. In this round of decline in the futures market short is particularly evident, leaving the market to target the foreign capital. So foreign is really caused by the collapse of the culprit it?
Soros have taken rumored sell A shares
This isn’t the first time the recent collapse of China’s stock market has been blamed on “hostile”, short-selling foreigners. In fact, just four days ago, the pro-China, Taiwan-based China Times suggested that Morgan Stanley (whose “don’t buy this dip” call late last month didn’t do the SHCOMP any favors), Credit Suisse, and Bill Gross may be using “massive funds” to precipitate a sell-off.
Via China Times:
Suspected hostile short-selling behind sell-off in China markets
In a report on the Chinese news site ifeng.com, an analyst said the sell-off was similar to what took place in Hong Kong in 1997, when the territory's benchmark Hang Seng Index plunged 60% after peaking at 16,673 points.
The steep drop in share prices in Hong Kong in 1997 was caused by financier George Soros, who shorted both the Hong Kong dollar and the Hang Seng Index futures, the analyst said, adding that similar practices were observed in the last two trading sessions in China.
According to the analyst, massive funds entered the futures market, building a short position and leading
to declines in the stock markets. The size of the funds and the sophisticated trading methods are beyond the ability of Chinese institutional investors, the analyst said.
In fact, Bill Gross of Janus Capital, a co-founder of global investment firm PIMCO, said in early June that the Shenzhen Stock Exchange's Component Index presented perfect short-selling opportunities.
At the time, the index was at a seven-year high but plummeted 30% on Gross's comments. Morgan Stanley and Credit Suisse have also been bearish on Chinese shares recently.
The problem for China, as we've pointed out on several occasions this week, is that Beijing has lost all control of the narrative, which puts the Politburo in unfamiliar territory. Rhetoric intended to calm the millions of newly-minted day traders who flooded into the market in Q1 and the beginning of Q2 has largely failed to stop the rush to the exits. China's highly leveraged retail masses are now ready to sell every rip in an effort to break even, a mentality that contrasts markedly with the BTFD bonanza that prevailed on Chinese exchanges right up until June.
Now, each new policy maneuver only serves to make Beijing appear more desperate, which in turn inflicts further damage on investors' fragile psyche, leading to still more selling and still more margin calls in a vicious cycle that has by no means run its course considering the hundreds of billions in margin debt investors have accumulated through backdoor channels such as umbrealla trusts and structured funds.
Whether George Soros is capitalizing (in a very tax efficient way we're sure) from the carnage we can't say, but what we do know is that Soros, Gross, Morgan Stanley, and Credit Suisse are likely the least of China's short-term problems.