Vladimir Putin posted:

I'm not impressed with single digit drops in one day; double digit drops are an event. Single digit drops are corrections.

Spazzle posted:

Bitcoiner or Chinese stock market investor.

quote:

ars 3 hours ago

The graph is quite misleading by not being logarithmic - it makes the gain seem smaller than it really is, and the loss larger.

A logarithmic graph will show that this drop is minor compared to the rise before it.

reply

Fojar38 posted:

I dare to dream.

Mr.Radar posted:

Another commenter in that HN thread referred to an FT Alphaville article that apparently mentioned that 70% of stocks hit their circuit breakers. I wonder what Monday will look like.

a brave man posted:

“People at work talk about their stock investment all day, debating whether the market has exited a bull run and entered bear market,” said Liu Chang, 28, who works in the tobacco industry in Wuxi, near Shanghai. “People who are not mentally strong enough have exited the market.”

Cultural Imperial posted:

Phone posting, but China just dropped overnight lending rates again as well as all capital requirements for banks or something.


Lollin

Fojar38 posted:

Will that help?

quote:

A little love from central mama


Subscribe

Free exchange

China’s economy

A little love from central mama

Jun 28th 2015, 8:54 by S.R. | SHANGHAI



CHINESE investors jokingly call the central bank "central mama". They thanked her for dispensing a bit of love over the weekend by trimming interest rates and reducing some lenders’ required reserves. Therate cut, her fourth since November, took one-year benchmark lending rates to 4.85%, a record low for China.

Punters hope this will save the stockmarket from further carnage. Having led the world for much of the past year, China’s equities have been in free fall over the past two weeks, tumbling 19%. Had the central bank done nothing, the rout would have been sure to deepen. Was it a sign of “desperation”? Though some characterised it as such, China’s easing, on a closer read, is more calibrated than that.

Advertisement

The cut to required reserve ratios (RRR) was mild byrecent standards. On April 20th, the People’s Bank of China slashed RRR for all banks by 1%, freeing up more cash for them to lend. That was equivalent to its injecting upwards of 1.3 trillion yuan ($210 billion) in the financial system. This time, it cut RRR only for smaller banks, such as rural commercial lenders, and by just half a percentage point. Depending on implementation, that will add about 100 billion yuan to the system, a far cry from an economy-wide cut.

What’s more, the central bank went out of its way to emphasise that it did not see a problem with current liquidity conditions. It said the level of cash in the financial system was “quite abundant” at the moment, noting that banks have 3 trillion yuan in excess reserves and that overnight lending rates are just about 1%, near historic lows. The RRR cut thus looks more like a gesture to reassure the market than a panicked loosening.

As for the rate cut, it is important to remember that interest rates by themselves play a relatively limited role in Chinese monetary policy because regulators still control the quantity of credit in the financial system through informal lending quotas. Rate cuts thus help reduce the cost of credit for borrowers, but they do not support credit growth, as is typically the case in developed economies. Indeed, the central bank said its main reason for cutting rates was to lower funding costs for companies. Low inflation means that real lending rates have remained stubbornly high, making the case for a cut.

And it would be misleading to describe the central bank’s easing as simply a knee-jerk reaction to the stockmarket sell-off. While the central bank certainly does not want to see stocks crash, what had been a raging bull market until two weeks ago had been making its work difficult. When data earlier in June showed that investment was still sluggish, the central bank held off from additional easing, apparently wary of stoking the speculative excess in equities. The stockmarket correction gave it more room in which to act. And with the limited nature of its RRR cut, the impression is that it wants to support the economy without refuelling the stock mania. Even central mama's love has its limits.

quote:

China braves volatility as it strives for balance

Palliative measures to cushion economic transition are no strategic U-turn

Vertiginous levels of debt, industrial overcapacity, slowing growth and deflation: it has seldom been easier to spin a bearish yarn out of China’s economic data. In any fully developed economy this combination would augur an asset price bust or, at best, a spell of extreme volatility.

Either may come to pass: for the first time in decades, capital is leaving the country, and the stock exchange is performing a passable impression of a market in the grip of late-stage mania.

But China is also a place where normal rules of thumb do not apply. Uniquely for an economy in its position — the largest as well as one of the fastest growing on the planet — its leadership has consciously planned for a transition towards a different growth model.

Weaning an economy this large from a lopsided dependence on investment was never going to be easy. China’s rulers have economic levers at hand, but knowing which ones to pull is hard.
At every tremor in the growth rate, there is pressure on the authorities to goose up demand. In the past, China’s first recourse has been to unleash credit, such as by leaning on local authorities to splurge on infrastructure or property. But decades of this has strewn debt across the land, much through 10,000 local government financing vehicles (LGFVs), which have total liabilities exceeding 40 per cent of gross domestic product.

The state recently eased up on demands that LGFVs repay their bank debt, and has just scrapped the loan-to-deposit cap imposed on banks. Such measures may free up lending conditions, but will prove more palliative than stimulating. Demand for credit is weak, and will not rebound any time soon: industry is suffering from overcapacity, and the LGFVs carry funding costs well above their return on assets. Non-performing loans are breaching new highs. Finance managers prefer to recover first before bingeing again.

Moreover, the challenge is not so much to fire up growth as to spark it where it has not previously been strong. Those sectors that drove China’s dizzying ascent — property, infrastructure, manufacturing — cannot sustainably carry the economy forward. The People’s Bank of China, never a champion of laissez faire, has made clear that it wants banks to divert credit to agriculture and small business — not normally huge drivers of heavy investment.

Against these China-specific challenges are some with a global flavour, notably incipient deflation. Falling prices have helped China hit its 7 per cent growth target despite historically weak demand in cash terms. It is nominal more than real aggregates that matter most to indebted companies, however; those in China now have revenues growing at just 0.7 per cent, no faster than in the trough of the 2008 financial crisis. This, again, is no auspicious backdrop for a rebound in investment.

All these factors suggest that China’s gradual shift from investment dependence is not set to reverse. The measures the authorities have taken to counter a slowdown are precautionary, but presage no change in strategy. New drivers of growth — smaller businesses, consumer spending and services — may struggle to rebound as fast as the old drivers retrench, but with unemployment at a 15-year low, there is a willingness to tolerate the distress this causes to places most reliant on the old model.

China’s flight on to a new growth path may prove turbulent, but there is as yet no reason to fear a hard landing. In fact, with more than 40 countries counting the Middle Kingdom as their top export partner, and Chinese imports decelerating, the bumpiest landing may await those beyond its borders.

quote:

China market in focus after rate cut

China’s roller-coaster stocks will again be under the spotlight after the central bank cut benchmark interest rates to a record low at the weekend, a move interpreted by analysts as an attempt to temper last week’s market meltdown

The Shanghai Composite sank 7.4 per cent on Friday, wiping hundreds of billions of dollars off the total market capitalisation of the index. The market has reversed 18.8 per cent from its June 12 high, although it is still up almost 30 per cent in the year to date.

The People’s Bank of China appeared to respond on Saturday, when it cut the one-year lending rate by 25 basis points to 4.85 per cent - its fourth cut since November - and lowered the amount of reserves certain banks are required to hold by 50 basis points.

“In China, a rate cut or a cut in the reserve requirement ratio is about signalling,” says Larry Hu, head of China economics at Macquarie. “The signal is mostly to boost confidence, and confidence plays a very important role in the Chinese economy.

“When the PBOC cuts interest rates or RRR it suggests China is in an easing cycle, that is very important. “It will inject a lot of confidence in the stock market”.

China’s stock market is widely seen as driven by policy at least as much as company fundamentals. The perception that the latest rate cut is a hasty response to Friday’s correction risks undermining the credibility of previous official statements that the government should focus on structural reforms and avoid trying to influence the level of the market.
The one year deposit rate will similarly be lowered b 25 basis, to 2 per cent.

“This is the best time for them to cut interest rates and the reserve requirement ratios,” said Shen Jianguang, chief Asia economist at Mizuho Securities. “If they had not acted, on Monday there would have been real panic in the stock market.

More than two-thirds of the companies listed in Shanghai hit their daily downward limit of 10 per cent on Friday. Some of the biggest stocks saw billions of dollars knocked off their value, with China Life Insurance shedding 7.5 per cent, while the tech-heavy Shenzhen market dropped 7.9 per cent.

Mr Shen added that real interest rates in China remained very high and investment continued to decline but the PBOC could not move before this because of the stock market bubble.
“The rate cut is a necessary step in the right direction,” said Wang Tao, China chief economist at UBS. “Real lending rates are still significantly higher than a year ago. High real rates [coupled with] a weak economy with deflationary pressures means a heavy debt service burden on the real economy, both the corporate sector and local governments.”

Mr Shen said he expected the government also to continue tightening up on margin finance, which helped fuel the recent stock market rally. Margin loans stood at Rmb2.2tn as of Wednesday, according to official data, up from Rmb403bn a year ago. The true extent of margin trading is hard to measure, however, due to the growth of “grey market” lending.
A week ago the regulator took fresh steps to tame the growth of margin lending, which some say contributed to last week’s market volatility.

Beijing has set a growth target of about 7 per cent for 2015, which would be the slowest annual expansion since 1990. An economic slowdown in comes as China moves from a traditional dependence on smokestack industries towards domestic consumption and services.

However, policymakers want to avoid an abrupt slowdown that could cause unemployment to spike and trigger a wave of defaults that could threaten financial stability.

“Today’s rate cut and targeted RRR cut can have a ‘one stone two birds’ effect, that is, it allows the PBoC to ease policy to boost the sluggish economy while sending a policy signal that authorities do not want to see a bear equity market, either”, Liu Li-gang and Zhou Hao, economists at ANZ Research, wrote in a note.

Cultural Imperial posted:

Welp, the SSE ain't crashin'. Well done I guess.

quote:

Global markets have awoken from complacency after Greece's parliament unexpectedly called for a referendum on the final bailout offer from the country's creditors.

The "Greferendum," announced Sunday, is to take place next weekend, even though eurozone finance ministers have already withdrawn the offer and rejected a five-day bailout extension. The increased likelihood of Greece leaving the eurozone, coupled with capital controls imposing a €60 daily limit on ATM withdrawals, has investors fleeing risky assets and scurrying into liquid havens.

The euro has dropped 1.4 per cent against the dollar to below $1.10, the lowest since June 2. Against the yen the common currency fell 2 per cent.

"Right now the surprise is that the euro is not weaker," said Steven Englander, currency strategist at CitiFX. "Logic may either be that Greek government will come back to negotiation table or that it will not survive long, if 'yes' prevails contrary to their recommendation."

A "no" vote could bolster support for Alexis Tsipras, prime minister. A "yes" vote could force his resignation, analysts say.

The biggest losses are in Japan, where the broad Topix index fell as much as 2.8 per cent, before paring to a 2 per cent loss. This puts the index on track for its worst daily session in two months.

In Australia, the S&P/ASX 200 fell 1.6 per cent, led by financials and consumer discretionary stocks. In South Korea, the Kospi fell 1 per cent. Futures suggest the S&P 500 will fall 1.2 per cent.

But in China retail investors couldn't care less it seems, about whether Greece stays in the eurozone. Instead, the bulls are back after the People's Bank of China cut benchmark interest rates by 25 basis points to a record low 4.85 per cent, and lowered the amount of reserves certain banks are required to hold by 50 basis points.

Economists at Nomura estimated the cut to the reserve requirement ratio would inject about Rmb650bn ($103bn) of liquidity into the banking system, supporting aggregate demand.

"This move supports our view that growth momentum will improve sequentially in coming months," they added.

The Shanghai Composite jumped 2.3 per cent at the open, after the index fell 7.4 per cent on Friday. But within 15 minutes of trading it was down more than 2 per cent.

But the PBoC move can at best mitigate the damage amid the ongoing drama in Greece.

Meanwhile, new data emphasised the lopsided recovery in Japan. Retail sales grew by 1.7 per cent month-on-month, their fastest monthly rate since last September, but industrial production contracted 4 per cent from a year ago, the most in nearly two years.

"The plunge in industrial production in May points to a contraction in GDP this quarter, and corroborates our view that the Bank of Japan will have to step up the pace of easing before too long," said analysts at Capital Economics.

Mozi posted:

If there's just one thing I know about bubbles, it's that they keep expanding in perpetuity.

Cultural Imperial posted:

Fojar38 posted:

Recovery!

Cultural Imperial posted:

Ok shithead. Explain how Bitcoin is going to help the low information chinese investor.

quote:

In China, you can now literally bet the house on the nation’s tumultuous stock market.

Under new rules announced Wednesday by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker.
While the rule change was intended to help revive confidence in China’s $7.7 trillion stock market after a 24 percent slump in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market.

“It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”

The new guidelines also permit non-listed shares and “other assets” as collateral for margin traders who have insufficient value in their stock accounts to repay loans. The China Securities Regulatory Commission didn’t respond to a faxed query on the changes, while Citic Securities Ltd., the nation’s biggest brokerage, declined to comment.
Shanghai Selloff

“This is simply not practical,” said Chen Gang, the chief investment officer at Shanghai Heqi Tongyi Asset Management Co. He joked with colleagues that brokers would have to become experts in everything from property to antiques, given the range of assets that clients could potentially pledge.

“Brokers are not stupid,” said Hao Hong, a China strategist at Bocom International Holdings Co. in Hong Kong. “I don’t think they would be willing to take this kind of collateral.”
The Shanghai Composite Index closed below the 4,000 level on Thursday for the first time since April, even after stock exchanges cut fees and the securities regulator rolled out its margin financing rule revisions more quickly than planned because of “market conditions.” Declines since June 12 have erased at least $2.4 trillion of value from Chinese shares, more than the entire market capitalization of France.

Margin traders, who boosted leveraged bets nine-fold to 2 trillion yuan ($322 billion) in the past two years, have been closing out those positions for a record eight straight days.
Controlled Risk

At Haitong Securities Co., China’s third-biggest brokerage, board secretary Huang Zhenghong said the firm was implementing the new rules, calling risks in its margin finance and securities lending business “controllable.” Huang didn’t comment on exactly what kinds of collateral Haitong will accept.

For Chen, relaxed rules on margin trading are unlikely to succeed in propping up the market. He said a half-year suspension of initial public offerings, which tend to weigh on the stock market because they divert funds from existing shares, would be more effective.

“It’s like your girlfriend has broken up with you and then you decide to buy her a one-carat ring” instead of something much bigger, Chen said. “That’s useless.”

quote:

Just within 1 hour, already over 1,000 stocks listed in Shenzhen & Shanghai market hit 10% daily down limit (and about 500 stocks suspended)

quote:

“It’s like your girlfriend has broken up with you and then you decide to buy her a one-carat ring” instead of something much bigger, Chen said. “That’s useless.”