Bloomberg: U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices

[greengiraffe]

Why the Chinese stockmarket shock doesn’t really matter
THE AUSTRALIAN JULY 18, 2015 12:00AM

Rowan Callick

Asia Pacific Editor
Melbourne

Here are 10 lessons from the recent sharemarket Great Fall of China.

1. As long as you don’t personally hold stocks there, don’t panic now, and in sunnier times, don’t exert yourself to cheer. It doesn’t signify much — maybe nothing at all — for the rest of the world.

China’s stockmarkets in Shanghai and Shenzhen are not linked with the real economy, either in China or in the wider world. They have often been branded as casinos. The markets, which opened in 1991, climbed slowly in total capitalisation up to 2000, then fell backwards, even after China’s accession to the World Trade Organisation provided a huge boost to business. They soared steeply in 2007, just as the global financial crisis struck virtually all other equity markets, then fell back again, stumbling along until the recent scorching run started in 2014. They doubled in value in the year up until their correction a few days ago, even as China’s gross domestic product slowed. Interest rate cuts don’t affect these markets, of course — they fell on June 29, the first trading day after rates were last cut.

2. Despite their recent angst, the retail investors who dominate the market — accounting for 80 per cent of trading volumes — will continue to bet on stocks, because of the lack of alternatives. The banks — virtually all state-owned — offer a return of just 3 per cent, in an economy slowing but still growing at 7 per cent.

Increasing barriers are being thrown up by the government to limit retail investment opportunities in real estate, to prevent reflation of the bubble there. Despite its reputation as a casino — an institution where all the punters ultimately lose — the sharemarket has provided a highly respectable mean return of about 15 per cent per year. This domination of the Chinese markets by individual investors has been reinforced by Shanghai-Hong Kong Stock Connect, the cross-boundary investment channel which began operating late last year.

3. When the going gets tough, China’s party-state gets going. The ruling communist party — these days personified through its leader Xi Jinping — claims for itself the credit for all the developmental successes of the hardworking Chinese people. Only recently, investors whooping it up branded it “the Uncle Xi bull market”.

But when the investment climate turns bad, the leadership understands that it also then cops the blame. Its core answer is simply to prevent that happening in too serious a manner, to put a floor in place. And so it looked, not for the first time, to its special administrative region of Hong Kong for inspiration when the market slumped by 30 per cent through the week to July 12.

In response to the Asian financial crisis that started in 1997, the Hong Kong government aggravated market liberals by buying stocks worth about $US15 billion, and later selling them down steadily to realise a considerable profit. The China Securities Regulatory Commission a fortnight ago ordered the country’s top 21 securities firms to contribute about $26bn towards a $56bn fund to buy exchange-traded funds linked to blue chips.

4. Investors have little interest in traditional metrics like price-earnings ratios. The mean p/e ratio at ChiNext, the small-cap board, recently soared past 90, more than double that of American internet stocks during the dotcom bubble at the turn of the millennium.

That didn’t faze anyone in China, it seemed. Company performance doesn’t matter too much either. Instead, investors tend to watch for government policy announcements, and especially for signs of fresh stimulus spending.

The ultimate goal is insider information, of course, or even merely rumoured inside dope.

5. Dividends are mostly small, and few investors take any note of them. They are also taxed, while capital gains are not. The entire focus of investors is on identifying triggers that drive price, not on yields — on trading and churning, rather than on holding stocks in the anticipation of longer-term gains.

6. Most of the 20 million or more middle class Chinese households that are retail investors will have lost, for now, some of the value of the smaller stocks they tend to favour, because the potential for rapid upside is perceived as greater. But the liquid, large-cap stocks — virtually all of them still state-controlled, with only minority stakes floated — did not fall nearly so far. As a demonstration of this, the Shanghai 50 index has overall massively outperformed the broader Shanghai Composite.

7. The biggest market gains for these large-cap shares have mostly come on listing. Typically, the big state-owned corporations that have been floated have presented massive stagging opportunities to the “lucky” — usually well-­connected — individuals and families who have happened on access to the shares at the issue price, mostly bought with cash forwarded by the state-owned banks.

8. It’s much safer to invest in the bigger government-owned blue chips than in private companies, however promising the latter’s IPO prospectuses. But the sharemarket’s valuations don’t act as disciplinary tools. For the most part, the blue chips do not rely significantly on the market to raise funds, preferring to use their own cashflows or bank loans, the latter relying heavily on their political clout. Instead, they use their equity status more as a demonstration to their government owners of their capacity to submit effectively to the heightened, more globally-aligned compliance requirements of the market regulators.

9. The Chinese markets are probably already buying opportunities. Xi wants to be the bull emperor again. He wants to boost consumption.

He wants to make it easier for Chinese firms to raise capital without relying on his overburdened state banks, and he has said in the past that he wants greater marketisation of the economy overall, although that latter course has been more wayward.

10. Notwithstanding this, unless you are the fortunate beneficiary of inside information, as an intimate of Chinese decision-makers … maybe better to brush up on your poker skills or on that form guide.

[greengiraffe]

China reins in online financing after stock rout
Published
2 hours ago

BEIJING • China has tightened controls on online financing, saying it is looking to develop healthy industry growth amid criticism the platforms contributed to an equities plunge that wiped US$3 trillion (S$4.1 trillion ) off the market.

The People's Bank of China (PBOC) will supervise online payments, while the China Banking Regulatory Commission will oversee online lending, trust and consumer finance, the monetary authority said in a statement on its website yesterday.

The central bank will support financial institutions starting online businesses, including banking, insurance and securities-related offerings, it said.

China's online lenders helped fuel an equity-market roller coaster that saw the benchmark index rallying more than 150 per cent in the 12 months through June 12 before crashing abruptly. The sites offered 3.1 billion yuan (S$683 million) of new loans for stock investment in May, about six times that of January, according to the Yingcan Group, which tracks the nation's 2,000 peer-to-peer finance platforms.

"This is a move by the government to tighten regulation of the industry, particularly for smaller companies," said Mr Xu Hongwei, chief executive officer at Yingcan. "We're waiting to see the details expected later this year, such as the minimum required capital for entry."

The China Securities Regulatory Commission (CSRC) said last weekend that it would ban online sites from handing out new loans for share purchases, blaming some "information-technology service providers" for illegal securities practices which it said contributed to the stock plunge.

The PBOC said in yesterday's statement that the CSRC will oversee equity crowdfunding and online fund sales, while insurance will be handled by the China Insurance Regulatory Commission.

BLOOMBERG

[greengiraffe]

Jul 19 2015 at 6:17 AM
China's Zhu Guangyao says sharemarket plunge shows 'mismatch for supervision'


Vice Finance Minister Zhu Guangyao says China's intervention to stabilise the market was justified given the level of turbulence.

China must learn lessons from its stock market rout, the country's vice finance minister said on Saturday, signalling his intent to focus on supervision and the development of new frameworks to make it possible to weather any future market turbulence.

China's stock market plunged by nearly a third at one stage earlier this month from a mid-June peak, wiping around $US4 trillion from share values as investors were spooked by speculation that China's central bank was about to end its monetary policy easing.

The slide sparked China's biggest rescue effort of its equity market, with the government launching a series of moves that included halting flotations and banning companies and their executives from selling shares.

Zhu Guangyao told Reuters Beijing was considering new policies.


"There is a mismatch for supervision, and that is a real challenge," he said in an interview at the Chinese Embassy in London. "After the big up and the big down we saw, we need to learn from other countries, mature stock markets including the US and UK"

The market has bounced in recent sessions and the CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 3.9 per cent on Friday to 4151.50.

Zhu said China's intervention to stabilise the market was justified given the level of turbulence and that there would now be an evaluation of what had happened to help draw up policies to handle any future market turmoil.

However he did not say what other policies might be considered.

Some investors have said market reforms and a move towards a market-driven economy, rather than short-term steps such as limiting share sales, are what will nurse markets back to health.

DIFFICULT YEAR

Even before panic spread through China's equity market in mid-June, it was shaping up to be a difficult year for the world's second-largest economy, feeling the pinch from slowing growth in trade, investment and domestic demand which was compounded by a cooling property sector and deflationary pressures.

State-owned enterprises and private companies, many of which are heavily indebted, have also been feeling the pressure.

Zhu said the government would allow some companies to go bankrupt rather than propping them up in order to create a more efficient debt market.

"(In) some cases certainly the borrower should take their responsibility, we've been very clear that's a market principle but we also emphasise we must avoid any negative impact to the regional and the systemic financial risk," he said.

"We have full confidence that we have the real capacity to (keep) ... our financial system healthy and sustainable".

Longer term, Zhu said he was confident China would be able to meet its potential economic growth rate of between 7 and 8 percent over the next five years through instituting market reforms which would enable productivity to rise.

Asked if he thought China's 2 trillion yuan debt-swap programme, designed to ease refinancing for highly indebted local governments and rev up economic growth, needed to be expanded, Zhu said the size should be sufficient, for now.

The programme allows provinces and cities to replace high-interest loans with lower-cost municipal bonds with longer-term maturities.

Data from the national audit bureau from June 2013 showed repayments by local governments could amount to 1.82 trillion yuan by the end of the year, he said.

"In my opinion, 2 trillions will cover all. But of course this figure is from June 2013, so certainly something should be more, but I don't know how much."

Originally, the debt swap programme had a quota of 1 trillion yuan, but in June the Ministry of Finance doubled it to 2 trillion. Earlier this month, some media reported Beijing was considering boosting the quota by another trillion.

While the debt restructuring helps China tackle its $US3 trillion debt burden, the swap programme has added supply pressure, pushed out other bond issuers and has been criticised for uncertainty over its scale.

Zhu acknowledged the concerns and said Beijing needed to enhance its communication and transparency with the market.

Reuters

[FA+TA]

實戰理論：暴力救市只是頭盤
沈振盈
證監會持牌人士

大市仍處於反覆震盪的局面，出現回吐應是市場共識，但港股相對於A股較穩妥，恒指只微跌65點。此刻要判斷的，是後市只是急跌後的反彈，還是見底回升後的調整。一切的關鍵，在於市場對希臘及A股兩大因素的看法。由於本周五為A股期指及美國三期的結算，相信今明兩天市況仍會是反覆格局，未有明確方向。內地的救市，一面倒被認為是有損形象的暴力行為，其實歐美諸國於危急關頭，何嘗不是同彈此調，差別只在五十步與一百步而已。

靜待挺經濟措施

但有一點可以肯定，中央花了這麼多功夫，絕不會半途而廢；既然外資覺得這是暴力干預，還會否「偏向虎山行」？醒目的資金當然會取易捨難，一齊買上去。筆者亦相信，干預市場只是頭盤，主菜應是接着而來的實體經濟政策、財政政策。

上周停牌、前日復牌的中國天化工（362），這兩天走勢穩定，停牌原因主要是獲第三方提出認購新股的消息。過去兩天股價皆於0.88至0.9元見支持，100日線的技術支持位約為0.8元，公司主要業務是製造及銷售醋酸乙烯等化工產品，以及在黑龍江生產及供應電力。早前集團進軍生物能源業務，與內地策略性夥伴組合營公司，組建生物能源電廠。此項目將可助集團擴大收入來源。

股價方面，6月初高見1.2元，其後跟隨大市反覆回落，停牌前守穩0.8元水平。只要不下破0.78元的止蝕位，上望1.2元。

[FA+TA]

SHARES INVESTMENT: Dr Chan Yan Chong's column - Chinese Market’s Wild Ride: Stay Calm As Outlook Remains Optimistic

China’s stock market had been rising sharply after the Shanghai-Hong Kong Stock Connect scheme was officially launched last November. The gain in the Shanghai Composite Index was staggering – from approximately 2,000 points to 5,000 points in just a few months.

People were under the impression that the Chinese government was intentionally pushing up the stock market to make it easier for private enterprises to raise capital.

Reason Behind SHCOMP’s Plunge

A vast number of citizens who knew nothing about the stock market became investors, many dreaming of getting rich overnight. The stock market seems to have turned into the largest casino for the Chinese.

To have bigger gains, one has to resort to leveraging. While margin trading is not uncommon elsewhere in the world, the Chinese are by far the most voracious borrowers.

Investors in Hong Kong and Singapore are limited to the amount of leverage brokerages are willing to offer. However, in China, there is something called “off-market lending”, involving financial companies (which are not brokerage firms) that lends money to stock market investors. These grey-market lenders operate at very high leverage ratios.

Chinese regulators eventually decided to clamp down on these illegal margin-lending activities, leading to the collapse of the stock market, especially for Growth Enterprise Market (GEM) stocks and third- or fourth-tier penny stocks. In a matter of weeks, the Shanghai Composite Index shed some 30 percent from its high before staging a hasty rebound.

SHCOMP Recovered Promptly

The quick rebound was clearly the result of the Chinese government’s intervention. Initial crackdowns on margin lending had forced many to liquidate their stock positions, which triggered a sudden plunge in stock prices, so much so that the Chinese government had to step in to prop up the market. At the same time, the Public Security Bureau began its investigations on malicious short selling activities.

As short sellers rushed to close their short positions, it contributed to the jarring rebound of stock prices. On 9 and 10 July, China A-shares staged a dramatic recovery – the Shanghai Composite Index rebounded by more than 10 percent within two days.

In another attempt to avoid a stock market crash, more than 1,000 China A-shares companies requested for voluntary suspensions from trading on 8 July. However, the effectiveness of the move will depend on how long the suspensions last.

In actual fact, small investors can self-impose a “suspension” on the shares, by treating their current stocks as if they were suspended, and take it as if buying or selling were not allowed.

After some time has passed – could be months or years – investors can then start to resume trading and see if the share prices have risen or fallen. While the method should work for major blue chip counters, it is hard to say for some of these ‘miracle’ shares.

Since returning to Hong Kong after my holiday, I have seen some friends betting on a rebound while others are taking stop-loss measures. I did not do anything, as current share prices are still not cheap enough to satisfy my conditions for bargain hunting, nor are they high enough for me to take profit.

At this stage, what investors should do is to refrain from borrowing, return all margin amounts, and take up good risk control measures.

Recovery: Organic Or Government-made

China’s stock market is not truly a free market, so if the central government wants the stock market to rise, that can actually be easily accomplished. The main trigger for the recent stock market rout was the government’s curb on margin lending activities.

Therefore, the stock market crash was expected by the government, who wanted to take the opportunity to rein in investors from making highly leveraged investments. How else will these crazed investors learn their lesson if they do not feel the pain of losing money?

While the Shanghai Composite Index has since rebounded, I believe most investors are still jittery. The sharp rebound was attributable to short sellers closing their positions in order to avoid trouble.

Therefore, after the majority of short sellers have closed their positions, the stock market is unlikely to rebound again and may enter a period of waiting.

Small investors who suffered heavy losses are unlikely to return to the stock market anytime soon. For those who did not borrow to buy stocks, keep a level head in the face of plunging share prices; avoid cutting losses impulsively and I believe that ultimately you will emerge from this debacle unscathed.

There are also some who chose to off-load their holdings as prices plummeted, even though they were not forced to sell due to margin constraints, because they are bearish about the near future and are betting on buying back their shares at a bargain when prices fall further.

However, the vast majority will not have the chance to buy back their shares, and are even less likely to buy them back at a low price. It is doubtful that these people, who sold their shares in panic, will dare to buy back the shares they sold as prices continue to fall, even though it may have been a bargain.

SHCOMP Outlook Still Optimistic

Despite the recent stock market crash, I am still optimistic on outlook for the market. Therefore, I suggest that individuals should take their minds off the stock market and avoid being too obsessed with the latest stock prices.

My optimism hinges on the belief that the Chinese government still wishes for a bullish stock market, since supporting private enterprises is an important national policy of the Chinese government.

The Chinese government hopes for the stock market to trend upwards, but does not want its people to become gamblers who treat the stock market as a casino. The leverage ratio of five times offered by off-market lenders is truly ridiculous, for that is a mad gamble.

The biggest difference between the stock market and the casino is that in the casino, one loses money immediately when a wrong bet is made; but if one buys shares and prices fall, it is still possible to hold and wait. Yet, a leverage ratio of 1:5 makes it difficult for an individual to hold on to his stock positions.

To profit from investing in stocks, one must be able to keep calm when others panic. As Warren Buffett famously puts it, “Be fearful when others are greedy, and be greedy when others are fearful.” Buffett is not encouraging investors to go bottom fishing or go short-term while hoping for a rebound, but to take advantage of low prices to go into long-term investment.

[opmi]

^^^ Govt supporting stock markets is important in bubble formation. eg. Japan and TW stock bubbles.

[greengiraffe]

China’s incredible shrinking sharemarket
GREGOR STUART HUNTER THE WALL STREET JOURNAL JULY 22, 2015 1:23PM

Investors have complained of “brazen” government interference in the equity markets. Source: AFP

China may have the world’s second-biggest stock market after the US, but at one point during a roller-coaster ride for investors this month only 93 of 2879 listed companies were freely tradeable — about the same number as trade in Oman.

On July 9, a day after the market hit bottom, just 3.2 per cent of Chinese-listed companies could be traded normally, according to an analysis by The Wall Street Journal using FactSet data. The rest of the shares on the Shenzhen and Shanghai stock exchanges either were suspended or hit their daily limit. China’s market rules prevent share prices from moving freely once they rise or fall by 10 per cent.

The findings are supported by an independent analysis by Gottex Fund Management, done at the behest of the Journal.

The daily-limit rule affected thousands of companies as the Shanghai market slid 32 per cent in less than four weeks through the July 8 bottom, then rebounded 15 per cent since then, while the smaller Shenzhen market slid 40 per cent and then rebounded 20.2 per cent — crossing the 20 per cent threshold that defines a bull market yesterday.

Most markets, including the New York Stock Exchange, employ “circuit breakers” to prevent wild swings in share prices over a short period, which can happen as a result of rapid-fire trading algorithms or human error. But in China, the limit rule was impeding trading of many companies at the same time investors were locked out of hundreds more that used an exchange rule allowing them to apply for trading halts ahead of major news that might cause a drastic price fluctuation.

At the height of suspensions, 51 per cent had taken themselves off the market, according to the Journal’s analysis. An additional 46 per cent were halted because of limit rules.

As the sell-off started to turn on July 9, trading volume declined sharply in Shenzhen, after trading in the majority of stocks had been halted. However, in the larger Shanghai market, shares still were trading at the same frenzied pace seen before the selling started. Investors were chasing an ever-dwindling pool of securities, which only got worse as more stocks hit limit up.

Fund managers, many of whom base their portfolios off Chinese stock indexes, were frustrated by the limited trading, which left them struggling to rebalance their holdings to account for the sell-off and subsequent rally. Some complained that China’s exchanges acquiesced too easily to company suspension requests and then slowed the pace of resumption to avoid a sudden influx of shares. Others said they were frustrated by the lack of transparency.

“In my experience, this was the most brazen act of a government to interfere in its equity markets,” said Timothy Atwill, head of investment strategy at Parametric, a unit of asset manager Eaton Vance Corp.

Peter Liao, a portfolio manager at New York-based Van Eck Global, said most of his orders weren’t executed because the stock had risen or fallen by the limit. Van Eck Global, which manages two exchange-traded funds in China valued at a combined $US150 million, is one of a handful of US-based firms with holdings in small and midsize Chinese companies.

The timing of the voluntary trading halts — in the midst of the sell-off — was perceived by some investors as far too convenient for the companies, letting them avoid further haemorrhaging.

The reasons companies gave for suspending their own stocks ranged from a “major event discussion” to “asset restructuring.” Since the sell-off ended, many companies have resumed trading. Yesterday, trading was suspended in 547 companies, close to the 474 suspended when Chinese markets hit their previous highs on June 12, according to FactSet data.

The Journal called 40 companies that had suspended their own shares during market turmoil. Six responded, and all said the decision was unrelated to the turbulence.

Haining China Leather Market, one of the Shenzhen-listed companies held by Van Eck Global, suspended trading on July 9, at which point its share price was down 52 per cent from the previous month. The company cited a proposed acquisition as the reason for requesting the suspension. It was “pure coincidence” that it came during the market plunge, company secretary Sun Yumin said, although he said a minority of investors had called to ask the company to request a suspension because of price volatility.

Van Eck Global’s Mr Liao said Chinese companies can “tick a box” in making the request, choosing from among 10 to 15 reasons for suspending their shares.

As the market began to turn around on the back of government money unleashed to prop up stocks, the problem of trading limits compounded the share suspensions. On July 13, three trading days after the market bottomed, as many as 54 per cent of stocks hit daily trading limits.

While shares that have hit their limits still can change hands at the price they last reached, it isn’t always easy to find someone to take the other side of the transaction. The prospective buyer of a stock that fell 10 per cent, for example, would be tempted to wait in anticipation of a lower price the next day.

The evaporation of tradeable stocks caught investors more off-guard than the price slump. Jonathan Krane, founder and chief executive officer at New York-based KraneShares, which manages an exchange-traded fund that includes small and midsize Chinese-listed companies, had to scramble to keep his portfolio running. Mr Krane said he was concerned about running afoul of US rules that require funds to have a certain amount of liquid stocks every day. Fortunately, the number of suspensions and share halts declined over the next few days. “If this had been prolonged, there would have been issues,” he said.

Although both KraneShares and Van Eck Global said they remained upbeat about the Chinese market, others said they were spooked by the moves, with the suspensions proving particularly unpopular.

Investors who had put money into Chinese companies via Stock Connect, a link that allows investors in Hong Kong and Shanghai to invest in each other’s markets, withdrew funds for 11 of the past 12 trading days, pulling a net 39.8 billion yuan ($US6.41 billion) out of Shanghai.

Columbia Threadneedle Investments, which manages $US506 billion in assets, said it is reviewing its exposure to Chinese-listed companies, or A-shares, in light of the government’s intervention. “What do you invest in a market that’s not clearing properly?” said Colin Moore, Columbia Threadneedle’s global chief investment officer.

For Parametric, Mr Atwill said the suspensions and halts sapped the firm’s desire to continue testing Stock Connect, which opened in November. Instead, it will refocus its interest on Hong Kong-listed H-shares, he said. Beijing had hoped the trading link would attract more institutional investors to mainland markets.

As for Haining China Leather, it resumed trading last week after being suspended three days. It said it had failed to reach an agreement on the price of its proposed acquisition, without giving further details. Its shares immediately hit the upper trading limit. On Monday, they closed 29 per cent above the suspension price.

With Wayne Ma

Wall Street Journal

[greengiraffe]

Jul 24 2015 at 5:14 AM Updated Jul 24 2015 at 7:24 AM
Hedge fund Bridgewater Associates' Ray Dalio turns from China bull to bear

"Our views about China have changed," billionaire Ray Dalio wrote in a joint note with colleagues. "There are now no safe places to invest." Bloomberg


by John Kehoe
A former bullish China investor and boss of the world's biggest hedge fund, Bridgewater Associates founder Ray Dalio, has made a striking U-turn on the Chinese economy, saying the recent stock market plunge may psychologically damage the Chinese and be a major headwind for Australia's biggest export market.

Bridgewater, which manages $US169 billion, told clients the recent stock market swoon could exacerbate problems stemming from the the country's debt bubble, according to US media reports.

The success or failure of China's economy will ultimately depend on the actions of policymakers to navigate through a tricky economic scenario, Bridgewater advised.

Mr Dalio, a long-time believer in China's economy who as recently as last month was spruiking the stock market rout as an opportunity for investors, suddenly turned more downbeat in a 10-page letter to clients this week.

"Our views about China have changed," billionaire Mr Dalio wrote in a joint note with colleagues, according to The Wall Street Journal.

"There are now no safe places to invest."

ABOUT-FACE

The Shanghai Composite index is down 22 per cent from its June peak, recovering some of the steep losses after falling more than 30 per cent earlier this month

Many China watchers have brushed off the stock market correction, pointing out the Shanghai index had more than doubled over the past year and that less than 15 per cent of households own stocks.

Mr Dalio, who has a net worth of $US15 billion according to Forbes​, originally seemed to subscribe to that view when he reportedly wrote in June that the fall was not "not significantly reflective of, or influential on, the Chinese economy, Chinese investors, or foreign investors".

However, in an about-face he said the impact of the stock market crash will be much bigger because the forces on growth are coming from "debt restructurings, economic restructurings and real estate and stock market bubbles bursting all at the same time."

"We are now seeing mutually reinforcing negative forces on growth," Mr Dalio said, according to an account of the letter relayed by CNBC.

Contacted by The Australian Financial Review, a Bridgewater spokesman said the fund's report was private, but that "Ray Dalio and Bridgewater believe that too much has been made of the shift in their thinking."

"The observations that were made simply noted that falling stock prices have a negative wealth and negative psychological effect," Bridgewater said in a statement.

"When a classic stock market bubble (supported by unsophisticated investors buying stocks on a lot of margin) bursts there are negative growth effects. When combined with the debt and economic restructurings underway, that will most likely result in slower growth, and more stimulative government policies to offset these downward pressures."

"Bridgewater's view that China faces debt and economic restructuring challenges, and that it has the resources and the capable leaders to manage these challenges, remains the same."

CHINA 'ON TOP' OF RISKS

Chinese authorities appear to have arrested the wild slide in the country's stocks, via a range of emergency measures such as banning large investors from selling shares, nudging banks to finance companies to buy their own shares, pumping liquidity into the market and vowing to investigate "malicious" short selling. Hundreds of companies were allowed to suspend their shares from trading.

The Chinese government is also trying to manage a challenging transition from a debt-fuelled investment-led economy to more consumption driven.

Dambisa Moyo, a global economist and board member of major miner Barrick Gold, said China was not immune from a slowing world economy, but the "government is much more ahead than people give them credit for".

Ms Moyo, a director of Barclays Bank, said she had confidence in the Chinese government's ability after meeting President Xi Jinping last year.

"It will be choppy and it won't be linear, but I think they are very much on top of the risks that the economy faces," she said.

"The authorities' willingness to really step in and use their tools is something the market discounts."

The Chinese government this month reported that its economy grew at a robust 7 per cent annual pace in the June quarter, though analysts questioned if the better-than-expected result was trustworthy.

COMMODITY CRUNCH

Its moderating economy, from growth of 10 per cent a few years ago, has contributed to the recent plunge in the price of iron ore, Australia's biggest export commodity, as well as copper, gold, oil and natural gas.

The commodity crash is rendering many smaller Australian miners unprofitable, and raising the prospects of more mine closures and asset sales.

Questions remain about huge debts in China's shadow bank and overdeveloped real estate sector, as well as the apparent slow down in the economy.

A simultaneous bursting of stock market and debt bubbles has occurred 28 times in major economies in the last 100 years, according to Bridgewater analysis.

These events created a "depressant" on real GDP growth of 1.8 per cent on average annually for three years, relative to what growth should have been without the twin crashes.

"We would expect China's outcome to be within that range, depending on how Chinese policymakers use their tools."

Meanwhile, there are concerns the recent volatility may cause China's leaders to delay liberalising their economy and financial markets.

FINANCIAL REFORMS 'DRAGGING THEIR FEET'

David Li, a member of the Chinese People's Political Consultative Committee and who served on China's Monetary Policy Committee, said the stock market crash would slow the country's planned financial sector reforms.

"Overall the financial reforms are still dragging their feet," Mr Li said in Washington at the Brookings Institution this week. He said it was difficult for entrepreneurs and small businesses to access credit, which was holding back the economy's potential.

Several US companies reporting second quarter earnings this week have disclosed disappointing results in their China operations, though Apple's iPhone sales surged 87 per cent in greater China.

Mr Dalio's shift reflects growing pessimism on Wall Street about the outlook for Asia's biggest economy. Hedge fund tsars including Elliott Management's Paul Singer, DoubleLine's Jeffrey Gundlach and Pershing Square Capital Management's Bill Ackman all raised the alarm on China at a hedge fund conference last week.

[greengiraffe]

I think I might have said before:

If Dr M can fight Soros during AFC in 97, CCP can do better and it will be another milestone event for PHD students reading global financial markets under economics...

http://www.straitstimes.com/business/com...-necessary

[BlueKelah]

Pop goes the weasel.

SSE dropping like a ton of bricks back down today. What are they going to do? halt all the stocks again?