China Crashes Most Since 2007

By | July 8, 2015

For a record 12th day in a row, Chinese margin debt balances have dropped with today’s 8.5% collapse the largest in history. As of last night, there were around 570/1694 Shenzhen stocks halted/suspended and hundreds more on the Shanghai bourse leaving more than 54% of all Chinese stocks frozen ($2.6 trillion or 40% of value). China continues to try to manage leverage down (raising margin requirements on stock futures) while encouraging speculation (easing rules for insurers to buy blue chips and financing the purchase of smaller company shares directly) and CYNK’ing the entire market – if it’s not open, you can’t sell it and the price cannot fall! It’s not working as CSI-300 futures are now down 7.9% in the preopen.

  • *CHINA TRADING HALTS FREEZE $2.6 TRILLION, 40% OF TOTAL VALUE

hina appears to be trying to manage leverage…

  • *CHINA RAISES MARGIN REQUIREMENT FOR CSI 500 INDEX FUTURES
  • *SHANGHAI MARGIN DEBT FALLS 8.5%, BIGGEST ONE-DAY DROP ON RECORD

 

The problem is the collateral value is falling faster than the margin debt leaving “leverage” still at record highs…

While encouraging speculation…

  • *CHINA EASES RULES FOR INSURERS TO INVEST IN BLUE CHIPS: XINHUA
  • *CHINA SECURITIES FINANCE TO BUY MORE SMALLER COS. SHRS: CSRC
  • *CHINA TRADING HALTS LEAVE 43% OF ENTIRE STOCK MARKET FROZEN
  • *1,249 CHINESE COMPANIES HAVE HALTED TRADING IN SHARES
  • UPDATE: Trading halts have left 1544 companies, equivalent of 54.7% of the Shanghai Composite and Shenzhen Composite, suspended today. (@GregorHunter)

With what we estimate is around 850-900 Shenzhen Composite stocks suspended (over half of the 1694 stocks in the index) and almost 25% of Shanghai Composite stocks, it appears China has resorted to the endgame in managing a collapse…

It’s not working…

  • *CSI 300 JULY FUTURES PLUNGE 7.9% IN SHANGHAI
  • *CHINA’S SHANGHAI COMPOSITE INDEX SET TO OPEN 7% LOWER

 

It looks like today could see China go red for the year…

Just add this to the list of interventions…

Judging by historical analogs, The Shanghai Composite will need to destroy all gains in the last 2 years before ‘value’ is once again seen…

 

Chinese investor psychology has shifted. Period. The more the government intervenes to lift stock prices explicitly, the more local and professsional leveraged investors will use any strength to unwind their positions (profitably or unprofitably).

4 thoughts on “China Crashes Most Since 2007

  1. Bramesh Post author

    Someone pain is Someone gains old age adage very apt here

  2. Raajjesh Shinde

    To suspend trading in 52% of listed stocks is ridiculous a few days make Brameshji, you had written a n article on chinese bubble and I had left a comment saying chinese markets cannot be trusted, the function of stock markets is to give the value of a company at that moment of time it could be very optimistic very pessimistic depending on the sentiments of the investors at that particular moment of time suspending trading just because the markets are crashing destroys the basic function of any market my personal feeling is it will do tremendous harm to the credibility of chinese market foreign investors nd domestic investors will remember this fool hardy thing for a long time it increases the appeal of the Indian market tremendously the credibility of Indian market tremendously what the chinese stock market has done is a big big favour to the indian market my personal feeling with credibilty lost for chinese market and indian being the second fastest economy there is going to be tremendous revaluation of indian companies as FII will see sense in investing in indian market
    BRAMESHJI what is your opinion Please do comment

  3. Preet

    Well talking of Indian markets this year is going to be traders market where we can see wild swings on both sides.So 2015 is Traders market whereas 2014 was Investors market where we saw parabolic one way move .

  4. Meena

    Waah….Guruji….Namaskar…..Fantastic Information and analysis…

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