China Economy Megathread

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I would blow Dane Cook: Dec 26, 2008

Caution Cultural Imperial do not read:

quote:

From HSBC:

The Shanghai Composite Index has fallen 27% since 12 June 2015, a sharp drop versus the 117% jump over the previous eight months. These dramatic swings have raised concerns about a possible negative impact on the economy. In this note we look at the main channels through which equity market volatility can affect the real economy. First, our estimates suggest that the stock market wealth effect has less impact on consumption than many think. Consumption growth in China is largely driven by income growth rather than changes in wealth and Chinese households still park most of their wealth in cash and deposits. Less than 15% of their financial assets are invested in stocks. Second, the recent IPO rush notwithstanding, total equity financing year to date amounted to RMB289bn, less than 5% of total social financing over the same period. Third, although margin financing on the equity market has risen rapidly, the trend has started to reverse over the past few weeks.

This is the point I�ve been making recently about the Shanghai bust not being disaster in and of itself. At a 15% share of household financial assets equity holdings are relatively minor. Add property and the share becomes small.

By comparison, Australian households hold roughly 7% of their total wealth in direct shares but that rises to 28% when we throw in super so it�s around 20-25% net.

The real problem is the Shanghai bust complicating the existing hard landing.

http://www.macrobusiness.com.au/2015/07/china-households-are-not-exposed-to-shares/

# ? Jul 7, 2015 09:42

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# ? May 13, 2024 20:26

TheBalor: Jun 18, 2001

Jesus, 117%?! I had known they were in a boom, but how could anyone assume that was healthy? Has there ever been an explosion of value like that that didn't result in a horrid crash?

# ? Jul 7, 2015 16:29

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

TheBalor posted:

Jesus, 117%?! I had known they were in a boom, but how could anyone assume that was healthy? Has there ever been an explosion of value like that that didn't result in a horrid crash?

It is the greatest culture and greatest economy in the world. What else would it do, but go up 117% in 8 months?

E: *banana cart posting*

# ? Jul 7, 2015 16:50

Pervis: Jan 12, 2001; YOSPOS

ocrumsprug posted:

It is the greatest culture and greatest economy in the world. What else would it do, but go up 117% in 8 months?

E: *banana cart posting*

This thinking applies to more than one country. The collective delusion that happens when something like a stock market bubble forms or housing bubble is incredibly strong. People want to believe that this time it's different and that there's easy money to be made for more than just the well-connected and corrupt, so they buy in to any hype or reasoning or just make their own. The banana cart seems to be their version of a TV show dedicated to house flipping, but the 1929 version. When that inevitably fails and the poor and middle class are left with less than they had before hopefully there's some resolution that keeps things stable, but the knock-off effects of the commodities market bursting would also impact China's ability to grow through exports (because there's really not enough consumers worldwide to fuel it - they are all struggling).

# ? Jul 7, 2015 17:01

Mr.Radar: Nov 5, 2005; You guys aren't going to believe this, but that guy is our games teacher.

If this report is true, holy poo poo...

China�s market rout is so bad, one in four companies have stopped trading posted:

After a brief respite on Monday, the Shanghai Composite Index headed steeply south again today (July 7), and despite a late trading rally ended down 1.26% for the day. Shenzhen�s composite index fared much worse, falling 5.36%.

Nearly 800 of Shanghai and Shenzhen-listed stocks have voluntarily suspended trading�or 27% of the total listed companies, the Securities Times reported this morning, (link in Chinese) thanks to the �irrational market slump.� Companies listed in Shanghai and Shenzhen can opt to stop trading pending the announcement of market moving information like major projects, but market sources told Reuters that they thought these companies were just trying to ride out the market�s fall. The suspensions certainly picked up in recent days:

These companies could technically remain suspended for as long as several months, which might give the market time to turn around. But their opting out of the market when things are down isn�t going to give investors much confidence in these companies� corporate governance.

Additional reporting by Zheping Huang.

# ? Jul 7, 2015 17:07

Mozi: Apr 4, 2004; Forms change so fast
Time is moving past
Memory is smoke
Gonna get wider when I die; Nap Ghost

Clearly I have very deep misunderstandings about how markets are supposed to work.

# ? Jul 7, 2015 18:48

Franks Happy Place: Mar 15, 2011; It is by weed alone I set my mind in motion. It is by the dank of Sapho that thoughts acquire speed, the lips acquire stains, stains become a warning. It is by weed alone I set my mind in motion.

Mr.Radar posted:

If this report is true, holy poo poo...

When last I checked last night, 1 in 5 companies had hit their stop limit, so yeah it's true.

# ? Jul 7, 2015 19:28

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

Jumpingmanjim posted:

Caution Cultural Imperial do not read:

http://www.macrobusiness.com.au/2015/07/china-households-are-not-exposed-to-shares/

Cool to know there are still people bullish about China.

# ? Jul 7, 2015 21:26

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Voluntarily de-listing your companies stock from the exchange, to stop its share price from declining. Brilliant!

I sure hope Wall Street is taking notes on how markets work from the Gnomes of Bejing.

# ? Jul 7, 2015 21:37

TyroneGoldstein: Mar 30, 2005

ocrumsprug posted:

Voluntarily de-listing your companies stock from the exchange, to stop its share price from declining. Brilliant!

Do they understand that the rest of the planet can see what they're attempting to do?

I mean...

# ? Jul 7, 2015 21:46

TheBuilder: Jul 11, 2001

This is an internal matter - please don't get involved.

# ? Jul 7, 2015 22:23

Freezer: Apr 20, 2001; The Earth is the cradle of the mind, but one cannot stay in the cradle forever.

TyroneGoldstein posted:

Do they understand that the rest of the planet can see what they're attempting to do?

I mean...

The stocks won't go down if they're not allowed to go down, what a masterstroke.

The fund managers should de-list all the stocks and then just take a three month long vacation, while they eat caviar off a hooker's rear end on a yatch, while coked out of their minds.

# ? Jul 8, 2015 00:18

VideoTapir: Oct 18, 2005; He'll tire eventually.

Freezer posted:

The stocks won't go down if they're not allowed to go down, what a masterstroke.

The fund managers should de-list all the stocks and then just take a three month long vacation, while they eat caviar off a hooker's rear end on a yatch, while coked out of their minds.

That could be the explanation for how things got where they are.

# ? Jul 8, 2015 00:23

Bates: Jun 15, 2006

Freezer posted:

The stocks won't go down if they're not allowed to go down, what a masterstroke.

The fund managers should de-list all the stocks and then just take a three month long vacation, while they eat caviar off a hooker's rear end on a yatch, while coked out of their minds.

Next step is founding a government agency that determines the value of stock :v:

# ? Jul 8, 2015 00:27

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Someone should mention it to Apple so they can pull their shares in between product rollouts, then we will all be rich.

# ? Jul 8, 2015 00:27

Broken Cog: Dec 29, 2009; We're all friends here

Aren't these shares essentially worthless for as long as they stay unlisted? What's going to reassure shareholders about the company for as long as their value stays frozen?

# ? Jul 8, 2015 00:30

Sheng-Ji Yang: Mar 5, 2014

Broken Cog posted:

Aren't these shares essentially worthless for as long as they stay unlisted? What's going to reassure shareholders about the company for as long as their value stays frozen?

The market is currently irrational, they will simply wait until it is rational again duh

# ? Jul 8, 2015 00:31

My Imaginary GF: Jul 17, 2005; by R. Guyovich

Sheng-ji Yang posted:

The market is currently irrational, they will simply wait until it is rational again duh

What if it doesn't return to rationality?

# ? Jul 8, 2015 02:26

Franks Happy Place: Mar 15, 2011; It is by weed alone I set my mind in motion. It is by the dank of Sapho that thoughts acquire speed, the lips acquire stains, stains become a warning. It is by weed alone I set my mind in motion.

SHCOMP down nearly 8% at open, I think we can officially call this bubble done.

# ? Jul 8, 2015 02:43

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

I lust for Chinese decline.

Right when they launched the AIIB too. :smuggo:

# ? Jul 8, 2015 02:51

MrNemo: Aug 26, 2010; "I just love beeting off"

You guys just don't understand great Chinese people. In current political situation it is clear that China is great, 5,000 year history shows this. Stock market climbing, bubbles, crashing, this is all Imperial mindset of America and lapdog Canada. Chinese people are not constrained within Imperialist system and show true Love of Country by turning stock Market graphs red colour. Colour of China. This is true Love of Country. Please do not concern yourself with internal matter.

# ? Jul 8, 2015 02:54

AtomikKrab: Jul 17, 2010; Keep on GOP rolling rolling rolling rolling.

China is crashing harder and harder... must be my birthday...

*checks clock.* An hour and a half until IT IS Come on china burn baby burn I want to see such unrest and turmoil from you just so the smug rear end people at work who were going on about china "Taking over the world" can eat some crow.

# ? Jul 8, 2015 03:22

namaste friends: Sep 18, 2004; by Smythe

http://www.bloomberg.com/news/articles/2015-07-08/china-trade-halts-hit-2-2-trillion-as-state-intervention-fails

This isn't going to stop the slide. It's just scaring the poo poo out of people even more.

# ? Jul 8, 2015 03:36

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/SoberLook/status/618614015934242816/photo/1

# ? Jul 8, 2015 04:00

namaste friends: Sep 18, 2004; by Smythe

http://www.bloomberg.com/news/articles/2015-07-07/goldman-sachs-says-there-s-no-china-stock-bubble-sees-27-rally

quote:

Goldman Sachs Says There�s No China Stock Bubble, Sees Rally

China�s biggest stock-market rout since 1992 has done nothing to erode the bullish outlook of Goldman Sachs Group Inc.

Kinger Lau, the bank�s China strategist in Hong Kong, predicts the large-cap CSI 300 Index will rally 27 percent over the next 12 months as government support measures boost investor confidence and monetary easing spurs economic growth. Leveraged positions aren�t big enough to trigger a market collapse, Lau says, and valuations have room to climb.

Goldman Sachs is sticking with its optimistic forecast in the face of record foreign outflows, the biggest-ever selloff by Chinese margin traders and a chorus of bubble warnings from international peers. The call hinges on the success of unprecedented government efforts to revive confidence among individual investors who watched equity values tumble by $3.2 trillion over the past three weeks.

�It�s not in a bubble yet,� Lau said in an interview. �China�s government has a lot of tools to support the market.�

The Shanghai Composite Index sank 4.7 percent to 3,553.92 at 9:51 a.m. local time on Wednesday, amid concern a raft of measures to stabilize equities is failing to stop the bear-market rout as traders unwind margin bets at a record pace. The CSI 300 Index lost 5 percent to 3,730.16.

At least 1,249 companies have halted trading on mainland Chinese exchanges, locking up $2.2 trillion of shares, or about 33 percent of China�s market capitalization. The developments led China�s central bank to say on Wednesday it�ll provide �ample liquidity� to the nation�s stock market.

Lau, who set his CSI 300 target on July 1, confirmed on Tuesday that the projection still stands. He�s been forecasting gains in Chinese shares for much of the past year, a stance that paid off as the CSI 300 surged to a seven-year high last month.

Bubble Warnings

The past few weeks, however, have been painful for bulls. The CSI 300 was down 27 percent from its peak at Tuesday�s close, while the Shanghai Composite Index just completed its biggest three-week tumble in more than two decades.

Margin traders reduced positions by more than 7 percent on Monday as the unwinding of leveraged bets extended for an unprecedented 11th day. Selling through the Shanghai-Hong Kong exchange link over the past two days swelled to a record, while strategists from BlackRock Inc. to Credit Suisse Group AG and Bank of America Corp. all warned of unsustainable valuations at the end of last month.

Even after the median price-to-earnings ratio in China dropped to 55 from 108 at the height of the rally in June, valuations are more than twice as high as those on the Standard & Poor�s 500 Index.

�The Shanghai market is still expensive,� Mark McFarland, the chief global economist at Coutts & Co. in Hong Kong, said in an interview on Bloomberg Television. Policy measures to support prices are �unlikely to be successful in the short term. Ultimately it�s people�s minds that you have to get into, to get confidence up. That�s a difficult task.�

State Buying

Lau says the government has enough firepower. Policy makers have already suspended initial public offerings, relaxed margin trading rules, cut transaction fees and directed state-run institutions to maintain or boost equity holdings. A group of 21 brokerages pooled at least 120 billion yuan ($19.3 billion) for a market support fund.
The central bank will probably keep easing monetary policy, Lau says, after four interest-rate cuts since November and reductions to banks� reserve requirements. The outlook for China�s economic growth has improved for three straight months, according to the China Bloomberg Monthly GDP Estimate index.

While Lau concedes there are pockets of over-valuation in China, particularly in small-cap stocks, he�s less concerned about the broader market. The CSI 300, which has a heavy weighting in low-priced financial stocks, trades at 17 times earnings, versus more than 40 times in 2007.

�Re-rating is not over for China�s stock market,� Lau said. �We are still positive.�

# ? Jul 8, 2015 04:06

namaste friends: Sep 18, 2004; by Smythe

http://on.ft.com/1dKWjc1

quote:

Markets: China's freeze fails to stop freefall

China's desperate efforts to prop up its tumbling sharemarket are failing to instil confidence, with Shanghai shares plunging 8 per cent at the open this morning.

A growing number of companies on China's mainland exchanges are suspending their shares from trading to avoid being pummelled in a three-and-a-half-week bear market.

The tally of companies on the Shanghai and Shenzhen bourses in or requesting trading halts has reached at least 1,476, freezing some $2.6tn worth of equity, according to Bloomberg calculations. That more than half of all listed companies.

The Shanghai Composite plunged as much as 8.2 per cent at the open, while the Shenzhen Composite was down as much as 4.2 per cent, By 11am the losses had been pared, but only to 4.5 per cent and 3.4 per cent, respectively.

It is mostly smaller companies that are requesting suspensions, leaving the blue-chip stocks to bear the brunt of the sell-off.

In Shanghai, all 10 sectors were down, led by utilities. PetroChina was down 4.8 per cent, Sinopec was down 6.6 per cent, and China Life Insurance was down 7.8 per cent. Among banks, ICBC was down 6.7 per cent and Agricultural Bank of China lost 2.9 per cent.

Reports were also swirling Beijing was taking further measures to support the market. Domestic media said the insurance regulator was allowing qualified insurers to increase their ratio of equity assets to 40 per cent from 30 per cent previously.

The biggest damage caused by the Chinese sharemarket's roller-coaster ride since the middle of last year has been to investors' faith in the government's ability to manage asset prices smoothly, Bank of America Merrill Lynch China strategist David Cui said.

"The difficulty the government has faced to stabilise the stock market has demonstrated the downside of that faith. As a result, we expect many of these assets to be re-priced lower going forward. Also, the ripple effect from the market correction has yet to show up - we expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis," he said.

However ANZ Greater China chief economist Li-Gang Liu thinks the market plunge of the past few weeks should be viewed as a "timely warning", but that it has yet to become a systemic crisis. Overall, he says, the balance sheet for China's banking sector remains healthy.

"The increase in margin trading accounts has been primarily retail based. There is no evidence that banks have widely accepted equity-based assets held by corporate as collateral, suggesting that falling share prices will unlikely result in massive credit defaults. Although key stakeholders, i.e. household and institutional investors as well as securities industries, will inevitably suffer from the fall of share prices, China's financial stability likely remains intact."

# ? Jul 8, 2015 04:19

GhostofJohnMuir: Aug 14, 2014; anime is not good

I'm really making an effort to see $3.2 trillion in equity lost in three weeks and a market that still has an average p/e of 55 as a situation to be optimistic about, but I just can't see it. I'm willing to buy that the effects of the bubble bursting might not be that ruinous due to higher rates of saving among the Chinese, but painting a rosy picture of a 27% seems like being intentionally obtuse.

# ? Jul 8, 2015 04:21

namaste friends: Sep 18, 2004; by Smythe

~reasons~

nothing more than

~reasons~

Trying to forget my ~reasons~ of love

Teardrops rolling down on my face

Trying to forget my ~reasons~ of love~~~

# ? Jul 8, 2015 04:24

Nintendo Kid: Aug 4, 2011; by Smythe

GhostofJohnMuir posted:

I'm really making an effort to see $3.2 trillion in equity lost in three weeks and a market that still has an average p/e of 55 as a situation to be optimistic about, but I just can't see it. I'm willing to buy that the effects of the bubble bursting might not be that ruinous due to higher rates of saving among the Chinese, but painting a rosy picture of a 27% seems like being intentionally obtuse.

I'm sure they'll make it up in volume!

# ? Jul 8, 2015 04:27

TheBalor: Jun 18, 2001

GhostofJohnMuir posted:

I'm really making an effort to see $3.2 trillion in equity lost in three weeks and a market that still has an average p/e of 55 as a situation to be optimistic about, but I just can't see it. I'm willing to buy that the effects of the bubble bursting might not be that ruinous due to higher rates of saving among the Chinese, but painting a rosy picture of a 27% seems like being intentionally obtuse.

I mean, in a way, this could be good for China long term. This could presage cracks in the CCP's power that lead to eventual liberalization and reform?

That, or they'll just start shooting everyone again.

# ? Jul 8, 2015 04:28

ductonius: Apr 9, 2007; I heard there's a cream for that...

TheBalor posted:

That, or they'll just start shooting everyone again.

This. This will happen. Either the CCP lays the hammer down or great indivisible China will divide into dozens of warring states. Again.

# ? Jul 8, 2015 04:39

Freezer: Apr 20, 2001; The Earth is the cradle of the mind, but one cannot stay in the cradle forever.

Cultural Imperial posted:

http://www.bloomberg.com/news/articles/2015-07-07/goldman-sachs-says-there-s-no-china-stock-bubble-sees-27-rally

Ah, okay then, crisis adverted everyone!

# ? Jul 8, 2015 04:48

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/george_chen/status/618592493521600513

quote:

George Chen
@george_chen
BREAKING: There's "panic sentiment" currently in our stock market with "unreasonable selling" pressure - China's stock regulator spokesman

# ? Jul 8, 2015 05:03

Sheng-Ji Yang: Mar 5, 2014

Well, that'll stabilize things.

# ? Jul 8, 2015 05:06

GhostofJohnMuir: Aug 14, 2014; anime is not good

https://www.youtube.com/watch?v=85t3aLQzTsI

# ? Jul 8, 2015 05:09

cheesetriangles: Jan 5, 2011

I love how every move they make is just making things worse.

# ? Jul 8, 2015 05:30

whatever7: Jul 26, 2001; by LITERALLY AN ADMIN

It's going back to 2000. Last time I went to China the market crashed. And I going back in Aug this year.

# ? Jul 8, 2015 05:33

icantfindaname: Jul 1, 2008

ductonius posted:

This. This will happen. Either the CCP lays the hammer down or great indivisible China will divide into dozens of warring states. Again.

I bet the Tibetans and Uighurs will be grieving

# ? Jul 8, 2015 05:59

Al-Saqr: Nov 11, 2007; One Day I Will Return To Your Side.

Can someone give me a quick and dirty on how stock market crashes like this can just magically happen out of thin air? or did a major housing bubble burst or something even happen that I missed?

# ? Jul 8, 2015 06:01

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# ? May 13, 2024 20:26

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

ductonius posted:

This. This will happen. Either the CCP lays the hammer down or great indivisible China will divide into dozens of warring states. Again.

The clique period of the 1900s is super interesting.

# ? Jul 8, 2015 06:18

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