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

[greengiraffe]

Jun 25 2015 at 7:18 AM Updated Jun 25 2015 at 7:18 AM SAVE ARTICLE PRINT China stocks poised to rise on easier bank lending limits

The People's Bank of China has cut benchmark interest rates for three times since November, and has lowered lenders' required reserve ratios twice this year. Reuters
by Belinda Cao and Aleksandra Gjorgievska

Chinese stock-index futures rose after the authorities removed a lending limit on commercial banks amid efforts to support growth in the world's second-largest economy.

Futures on the FTSE China A50 Index climbed 0.8 per cent to 13,290 as of 4.30pm in New York, while contracts on the Hang Seng China Enterprises Index of mainland companies traded in Hong Kong gained for a fourth day. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF advanced 1.1 per cent.

The government scrapped a ratio that caps banks' loans to 75 per cent of deposits in a draft amending the nation's banking law, according to a statement posted to its website Wednesday. The proposal, which needs to be approved by the nation's legislature, will allow banks more flexibility to manage their lending business. Policy makers have sought to ease some of the stresses in the financial system to help boost growth as the economy expanded at the slowest pace since 1990.

"It will be seen as an ongoing message from the government that they are prepared to take measures to support the economy," Tony Hann, the head of emerging markets at Blackfriars Asset Management in London, said by phone. "The market will take that positively. The first reaction will be that this is seen as supportive of the banks."

Industrial and Commercial Bank of China, the world's largest lender by assets, rose for a third day in over-the- counter trading in New York. Its American depositary receipts gained 0.8 per cent to a three-week high of $US17.31. ADRs of Agricultural Bank of China added 0.7 per cent.

The People's Bank of China has cut benchmark interest rates for three times since November, and has lowered lenders' required reserve ratios twice this year.

Bloomberg

[greengiraffe]

What goes up must come down...

http://www.bloomberg.com/news/articles/2...tures-drop

Chinese Stocks Tumble as Morgan Stanley Says Don’t Buy the Dip
June 26, 2015 — 9:29 AM SGT Updated on June 26, 2015 — 1:13 PM SGT


Chinese stocks tumbled, with the Shanghai Composite Index falling more than 4 percent, amid mounting concern that the nation’s longest-ever bull market has peaked.
Friday’s rout was paced by technology shares and smaller companies, the leaders of China’s world-beating rally through mid-June. More than 21 stocks fell for each one that rose on the Shanghai Composite, which sank 4.6 percent to a five-week low of 4,320.97 at 1:06 p.m.
China’s $8.8 trillion stock market has plunged from first to worst on global performance rankings as leveraged speculators unwind their positions and a growing number of analysts warn that valuations have climbed too far. Morgan Stanley advised clients to refrain from purchasing mainland shares in a report on Friday, saying the Shanghai Composite’s June 12 high likely marked the top of the bull market.
“This is probably not a dip to buy,” wrote Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley in Hong Kong. “In fact, we think the balance of probabilities is that the top for the cycle on Shanghai, Shenzhen and the ChiNext has now taken place.”
The Shanghai Composite has surged 124 percent over the past year through Thursday as margin debt climbed to a record and investors speculated monetary stimulus will revive the weakest economic expansion in more than two decades. The bull market, which turned 935 days old Friday, is the longest since Chinese bourses opened for trading in 1990 and more than five times the average lifespan of previous rallies.
Margin Concern
With little in the way of economic data or corporate announcements to spark the plunge on Friday, some investors pointed to signs of a pullback by leveraged traders. Outstanding margin debt on the Shanghai Stock Exchange dropped for a fourth day on Thursday to 1.42 trillion yuan ($229 billion).
“The correction is basically margin selling,” said Francis Lun, the chief executive officer at Geo Securities Ltd. in Hong Kong.
The stocks favored most by margin traders at the height of China’s boom in mid-June have since tumbled 24 percent, helping send volatility in the Shanghai Composite to the highest levels since 2009. The benchmark index has had nine straight sessions of intraday swings exceeding 2 percent.
Concern over a shortage of liquidity has helped fuel losses this week as investor funds got tied up in new share sales and the People’s Bank of China refrained from easing monetary policy, disappointing some analysts who had anticipated a cut in interest rates or banks’ reserve requirement ratios.
Bubble Warnings
Morgan Stanley cited increased equity supply, weak earnings growth, high valuations and the surge in margin debt for its pessimistic stance, saying the Shanghai Composite may fall as much as 30 percent through mid-2016.
Strategists at BlackRock Inc., Credit Suisse Group AG and Bank of America Corp. all said last week that Chinese equities are in a bubble, while the median stock on mainland exchanges is valued at 85 times earnings -- higher than when the market peaked in October 2007.
The CSI 300 Index of China’s largest companies slumped 4.6 percent, led by a 9 percent drop in technology shares. The small-cap ChiNext gauge tumbled 8.2 percent, set to enter a bear market after falling 26 percent from its June 3 peak. The Hang Seng China Enterprises Index of mainland companies in Hong Kong fell 1.7 percent and the Hang Seng Index lost 1.6 percent.

[BlueKelah]

are my eyes seeing the right thing? SSE down 8%+ today. Looks like a correction now.. This will severely impact their property sector as well. When you kena margin call, the bank will force sell your shares and take your other assets.

Of course bulls will say this is just the market taking a breather ;D and good opportunity to buy on dips. Or that the China Gov won;t let things get too bad.

Japan 2.0 coming soon...


Hope buddies reading this thread have been able limit their exposure to this predictable event.

[greengiraffe]

If CCP is as simpleton as you deemed them to be, then they will not be called Comrades for nothing...

The world is so complex now that we have to think beyond layman.

Chinese mkt rally is started by Central. If they have no fear in their calls and mobilised so much citizens' hard earned monies, then one should have faith in their strategies.

I have no vested interests in any Mainlander shares except for my biggest core in CMP.

I still maintain that CCP has a bigger mission than just the mkt rally that we have seen so far.

In CCP we trust.

GG

are my eyes seeing the right thing? SSE down 8%+ today. Looks like a correction now.. This will severely impact their property sector as well. When you kena margin call, the bank will force sell your shares and take your other assets.

Of course bulls will say this is just the market taking a breather ;D and good opportunity to buy on dips. Or that the China Gov won;t let things get too bad.

Japan 2.0 coming soon...


Hope buddies reading this thread have been able limit their exposure to this predictable event.

[opmi]

Recent High 5,178.19
Today Close 4,192.875

Down 19% from the recent high....

[greengiraffe]

China’s sharemarket slide makes investors nervous
THE AUSTRALIAN JUNE 27, 2015 12:00AM

Scott Murdoch

China Correspondent
Beijing

Many of China’s retail investors are feeling the pinch. Source: AP
On Thursday afternoon, as the Chinese stockmarket tanked by another 3.5 per cent, retired worker Mrs Liu was nervous as she watched the value of her equities portfolio fall further.

In the Dongzhimen office of China Securities, dozens of mostly elderly investors nursed their thermoses of hot tea, eyes glued to the large electronic screens showing the latest, almost daily instalment, of the Shanghai market wipe-out.

Unlike Australia, falling stocks are displayed in green while rising stocks are in red. When The Weekend Australian visited on Thursday, it was a sea of green but there was little good news. The Shanghai market has risen more than 125 per cent over the past year, but in the past week it lost nearly 15 per cent. Whether the bubble has burst or it’s a healthy dose of volatility in an out-of-control bull market is a question that has investors and analysts divided.

Mrs Liu invested 200,000 yuan ($42,000) in the market over the past year, buoyed by its record run, and like hundreds of thousands of investors she did not want to miss the wave of growing wealth.

“I entered the market at the end of last year and invested 100,000 yuan. The market was so good and I put another 100,000 yuan. But now, it is so disappointing,” Mrs Liu said.

“Last week, I lost all profits I made since the start of the year because the market slumped several hundreds points. I am worried I will lose all my money. I think the government has just used us retail investors to raise funds.

“The government seems to make policies to lift or sink stock prices in different sections from time to time, SOEs, then banking ... which makes the market very unstable. I think the best time of the bull market has passed away.”

In the securities office in central Beijing, investors huddled around touch-screen terminals making their investments, much like placing a horseracing bet.

There was some optimism from some of them despite the major losses of the past month and the unprecedented volatility on the mainland markets.

Mr Cui, 51, has 500,000 yuan in the market and even though the losses are mounting he remains confident the Shanghai market fundamentals are strong. Analysts estimate the wipe-out over the past week cost retail investors about 50,000 yuan.

“After a long time of bear market, I think the bull market will continue and the market will reach over 5000,” Mr Cui said.

“Most of my money is in SOE stocks. So far, my stocks have performed well. Although there is volatility, the whole trend is up.”

Another investor, Mrs Zhu, prompted a colourful outburst on the China Securities floor when she predicted the A market could double in the next few years. A loud verbal joust between her and some investors not so optimistic as they saw the screens filled with green prompted securities floor officials to intervene.

“I am quite confident with the stockmarket,” Mrs Zhu said. “There is still a large space for the market to get higher. Someone told me it would be up to 10,000 points. The slump last week was just a periodic adjustment. You see the market regaining its footing this week. As a stock investor, you must be patient.”

The Chinese government has become so concerned about the stockmarket volatility, its press regulator this week ordered state media agencies to tone down financial market coverage.

In a “propaganda notice” it said that all marketing reporting must be “comprehensive, balanced, objective and rational”.

“Do not speculate and evaluate the current market trends,” it said.

“Do not highlight panic and the pessimistic mood and do not use sentimental words like slump and collapse.”

Some analysts believe the market correction was the result of the pent-up demand while others have forecast that the main boards will bounce back sharply.

Yingda Securities senior economist Li Daxiao said the main Shanghai board was comparable to the Nasdaq before its spectacular crash in 2000. Mr Li said the recent rush of IPOs would help even out the demand from investors to buy, with more stock coming on to the market.

“The bull market lifted by leverage has come to an end, because government policy is intending to reduce leverage and control risks,” he said.

“In my opinion, the stockmarket now is extremely highly valued and it is not sustainable. The A share is 86 times overvalued, which is higher than Nasdaq peak in 2000. It is one of the most seriously high valuations in human history. Currently, it is definitely not a paradise for investors. I would like not use the word ‘hell’. I want to remind investors that it is time to harvest, not sow.”

However, despite the pessimism, Minsheng Securities analyst Li Qilin said the market should return as investors increasingly turned away from China’s volatile national property market.

“I am optimistic about the stockmarket. The bull market has not reached peak yet. The slower growth of margin trading is caused by the crackdown on illegal funding,” he said.

Credit Suisse analyst Vincent Chan said the recent volatility was most evident in the smaller ­Chinese-based stocks listed in Shenzhen and on the ChiNext board, but negativity was likely to continue on the larger Shanghai market.

“The A-share small cap universe is a bubble. It is just a matter of time before it bursts. The main board of Shanghai is slightly better, but not much,” he said.

“There is always an argument that Chinese government wants to and will be able to engineer a multi-year slow bull market.

“The Chinese stockmarket has always been anything but a slow bull market — it is more like a raging bull.”

Hao Hong, the research managing director of Bocom Group, a wholly owned subsidiary of the Bank of Communications, said Shanghai’s rapid rise showed the market was clearly in “bubble territory”.

The sell-off over the past fortnight has been exacerbated because nearly 120,000 new share trading accounts have been opened every day over the past six months. The Chinese government eased restrictions that citizens could only hold one account each, blowing out the number of investors entering the market.

“As Shanghai rose to 5000 it was prevalent strategy among professional fund managers to follow the crew but flee if the market ever slightly turned sour.

“The world record turnover was more than double that of the US and easily dwarfs other markets. There was exploding volume, concurrent with significant daily turnover, which are the hallmarks of a bubble that is likely in its advanced stage.”

Additional reporting: Wang Yuanyuan

[opmi]

Liquidity still around.
Animal spirits taking a breather.
My bet is the bubble is still alive and kicking.
If mkt goes up further after this correction, more people
will be deluded and sucked in.

[BlueKelah]

The market has probably peaked with farmers and other common folk all rushing in to speculate with their savings previously locked away after the crash during GFC.

With earnings dropping across all sectors, its only a matter of time before we get to see a spectacular crash as valuation normalizes back to more reasonable levels. The other day there was a sudden 6.5% drop, i read some banks had already cashed out their stock holdings or something. Those in the know already sold, others will just end up carrying the baby.

Should greece default next week, there will be little beijing can do to stop this correction becoming a crash.

sent from my Galaxy Tab S

[greengiraffe]

Mate, yr tagline has been ever present - those who follow yr advice to short China mati until no eyes see liao...

Actually you reminded me of Dr Doom...

The market has probably peaked with farmers and other common folk all rushing in to speculate with their savings previously locked away after the crash during GFC.

With earnings dropping across all sectors, its only a matter of time before we get to see a spectacular crash as valuation normalizes back to more reasonable levels. The other day there was a sudden 6,,.5% drop, i read some banks had already cashed out their stock holdings or something. Those in the know already sold, others will just end up carrying the baby.

Should greece default next week, there will be little beijing can do to stop this correction becoming a crash.

sent from my Galaxy Tab S

[greengiraffe]

In CCP we trust...

http://www.bloomberg.com/news/articles/2...m-slowdown

China Cuts Interest Rates, Reserve Ratio in Bid to Stem Slowdown
June 27, 2015 — 5:30 PM SGT
Off-Balance Sheet Lending Pumps Up Default Risk
Nelson Ching/Bloomberg

China’s central bank cut its benchmark lending rate to record low and lowered reserve-requirement ratios for some lenders, accelerating monetary easing as an economic slowdown threatens to drive up joblessness.
In the fourth reduction since November, the one-year lending rate will be reduced by 25 basis points to 4.85 percent effective June 28, the People’s Bank of China said on its website Saturday. The one-year deposit rate will fall by 25 basis points to 2 percent, while reserve ratios for some lenders including city commercial and rural commercial banks will be cut by 50 basis points, according to the statement.
China is battling excess industrial capacity, local-government debt and capital outflows, with the economy expanding at the slowest pace since 2009 in the first quarter. Today’s central bank cut, which adds to its own monetary easing and that of about 30 counterparts around the world this year, follows May data showing stabilization in industrial output and lending.
“A more convincing rebound may come next quarter,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, said in a report before the announcement. “With real activity still weak and deflationary pressures mounting, policy easing has continued to escalate in recent weeks, the boost from which should come soon.”
Industrial output accelerated and aggregate financing beat estimates in May, pushing Bloomberg’s monthly gross domestic product tracker to the quickest growth since January.
Premier Li Keqiang announced a growth target of about 7 percent for 2015, which would be the slowest annual expansion since 1990. Policymakers are juggling the need to keep growth from slipping too far with plans to press ahead with reforms.