Chinese Stocks Open Lower As Margin Debt Tumbles To 4-Month Lows, Regulators Probe Officials' Sales

Following last night's afternoon session melt-up at the hands of a $100bn injection into China's sovereign rescue fund, Chinese stocks opened higher but faded fast, with no follow-through from yesterday's farce. With Warren Buffett's favorite indicator flashing red for China (and US) stocks, and so many rural Chinese citizens "just hoping to get out at breakeven," any assistance in levitating the nation's stocks are simply being sold into as margined traders unwind their positions. One such leveraged 'citizen' is none other than State-Owned-Enterprise GM Yang Shengjun, whose firm was ironically among the most vocal in blaming the crash on "malicious foreign sellers trying tio start an economic war" and is now under investigation for dumping his own shares... do as I say Chinese people, not as I do.

A reminder of last night's farce...

The good news...

  • *SHANGHAI EXCHANGE MARGIN DEBT DECLINES TO FOUR-MONTH LOW

So at least - whether through forced liquidation or common sense - the leverage is being unwound.

*  *  *

And tonight, for now...

  • *CHINA'S CSI 300 INDEX SET TO OPEN DOWN 0.4% TO 3,915.78
  • *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 0.4% TO 3,773.79

with no follow-through from yesterday's excitment...

 

But, as Forbes notes, Chinese stocks are as bubblicious as US stocks (or vice versa) according to Warren Buffett's favorite indicator of equity market valuation...

 

And do not forget the most important chart in China right now.... just as in The US - must keep stocks above 200DMA at all costs...

There was at least one malicious seller... (as WSJ reports)

A listed arm of China’s state-owned aerospace and defense company and its two largest shareholders are under investigation for potential violation of stock-selling rules, according to the securities regulator.

AVIC Heibao Co., a manufacturing subsidiary of Aviation Industry Corp. of China, known as AVIC, said Wednesday that shareholders Jincheng Group and AVIC Investment Holdings had received notice of the investigation from the China Securities Regulatory Commission. The regulator didn’t disclose further details of the investigation.

In addition, AVIC Capital Co., AVIC Heibao’s trading arm, dismissed General Manager Yang Shengjun on Wednesday, after AVIC Capital told the Shanghai Stock Exchange that AVIC Heibao is being probed by the regulator for selling shares on Tuesday.

The massive irony is...

The investigation comes after AVIC Chairman Lin Zuoming this month criticized foreign short sellers for deliberately instigating “an economic war against China” and pledged to prop up the market by buying shares. Short sellers bet that a stock’s price will fall. AVIC couldn’t immediately be reached for comment.

 

AVIC Heibao said on June 30 that its top shareholder, Jincheng Group, had sold 3.39 million shares in the company for 78.8 million yuan ($12.7 million), while AVIC Investment Holdings, its second-largest shareholder, had shed all of its 16.8 million shares for 431.4 million yuan from June 5 to June 29. The two shareholders dumped a combined 5.86% of the company’s total issued shares.

Do as your leaders say Chinese people... not as they do.

And amid all this carnage... USDCNY has been deadstick...

Charts: Bloomberg