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

[opmi]

What about TARP in free-market USA?

I agree that it is too extreme, and not helpful for the capital market liberalization effort...

China’s stock sale ban draws scorns from Templeton, Wells Fargo

NEW YORK (July 9): Templeton Emerging Markets Group calls it an act of “desperation.” UBS Wealth Management labels it “extreme.” And Wells Fargo Funds Management says it just “postpones the inevitable.”

China’s decision to ban major stockholders from selling stakes in listed companies has drawn skepticism from foreign investors. The money managers, with combined assets of almost US$4 trillion ($5.4 trillion), say the latest step to stem the country’s equity rout is just another measure to meddle in the market and won’t be enough to restore investors’ confidence.

“It suggests desperation,” Mark Mobius, chairman of Templeton Emerging Markets Group, said by phone. “It actually creates more fear because it shows that they’ve lost control.”

The China Securities Regulatory Commission said Wednesday that investors with holdings exceeding 5% as well as corporate executives and directors are prohibited from selling stakes for six months. The rule is intended to stabilise capital markets amid an “unreasonable plunge” in share prices, it said.

While China has already ordered government-owned institutions to maintain or increase stock holdings, the CSRC directive expands the sales ban to non-state companies and potentially foreign investors who own major stakes in mainland businesses.
...
http://www.theedgemarkets.com/sg/article...ells-fargo

[CityFarmer]

You are referring to the bank bail-out program by US authority in 2008. It is pretty different in nature between the TARP and the China measure below, right?

What about TARP in free-market USA?

I agree that it is too extreme, and not helpful for the capital market liberalization effort...

China’s stock sale ban draws scorns from Templeton, Wells Fargo

NEW YORK (July 9): Templeton Emerging Markets Group calls it an act of “desperation.” UBS Wealth Management labels it “extreme.” And Wells Fargo Funds Management says it just “postpones the inevitable.”

China’s decision to ban major stockholders from selling stakes in listed companies has drawn skepticism from foreign investors. The money managers, with combined assets of almost US$4 trillion ($5.4 trillion), say the latest step to stem the country’s equity rout is just another measure to meddle in the market and won’t be enough to restore investors’ confidence.

“It suggests desperation,” Mark Mobius, chairman of Templeton Emerging Markets Group, said by phone. “It actually creates more fear because it shows that they’ve lost control.”

The China Securities Regulatory Commission said Wednesday that investors with holdings exceeding 5% as well as corporate executives and directors are prohibited from selling stakes for six months. The rule is intended to stabilise capital markets amid an “unreasonable plunge” in share prices, it said.

While China has already ordered government-owned institutions to maintain or increase stock holdings, the CSRC directive expands the sales ban to non-state companies and potentially foreign investors who own major stakes in mainland businesses.
...
http://www.theedgemarkets.com/sg/article...ells-fargo

[opmi]

^^ Yes. Extreme situations call for extreme measures.

[CityFarmer]

^^ Yes. Extreme situations call for extreme measures.

Agree, both with similar agenda.

[FA+TA]

China shares revive strongly on government moves
China stock market also affect Nikkei
Nikkei erases sharp losses as China stocks stem torrid slide
东京股市受中国股市影响盘中巨幅震荡
We shall see what happen to China indexes this week & next week.

[greengiraffe]

Beijing caught off-guard by its own creation
SHEN HONG, LINGLING WEI THE AUSTRALIAN JULY 10, 2015 12:00AM

  Source: TheAustralian
Since the last week of June, the Chinese government has intervened in the country’s stockmarkets nearly every day to slow their steep slide. But the harder Chinese authorities try, the more it looks like they are losing control.

The Shanghai Composite Index fell is down almost one-third from its peak on June 12. Since then, $US3.5 trillion ($4.68 trillion) in value has been erased from companies in the benchmark index — or nearly five times the size of Apple.

China’s bond market and currency also began to get hit this week as worries deepened that a contagion from stockmarket losses could further trammel the country’s slowing economy. It felt even more ominous because Chinese officials had rushed out another raft of emergency measures to reassure the market.

The moves only heightened what is turning into an epidemic of anxiety among Chinese investors and a crisis of confidence in their leaders.

“The more the government intervenes, the more scared I am,” said Li Jun, who runs a fishing and restaurant business in the eastern city of Nanjing. He has spent about 3 million yuan ($646,000) on stocks, using borrowed money for about one-third of the total.

Mr Li has sold some of his investments every time the market “popped up a little” following a rescue announcement by the Chinese government. He said he had “no faith” in its ability to halt the losses.

Wednesday’s drop left the Shanghai index down 32 per cent from its peak and at its lowest level since March. However, by late yesterday both markets had clawed back some losses, with Shanghai up 1.3 per cent and Shenzhen up 3 per cent on the session.

The latest drastic step by Beijing is a six-month ban on stock sales by controlling shareholders and executives who own more than 5 per cent of a company’s shares. Any violation of the rule, announced on Wednesday night, would be “treated seriously”, China’s securities regulator said.

Early yesterday, China’s central bank said it had provided “ample liquidity” to a company owned by the country’s top securities regulator. The company was lending the funds to securities firms, which then would use the money to buy stocks.

The Chinese government has been praised for driving decades of economic growth and keeping the economy strong during the global financial crisis. In recent years, authorities have struggled with rising debt levels and the need to reform the economy away from government-driven infrastructure programs and towards consumer spending.

As it fought slower growth and a weakening real estate market, the government turned its attention to the country’s languishing stockmarkets. But Beijing’s inability to stop the recent decline has rattled investors who have long been used to seeing the government use its power to control markets.

“Beijing’s latest bid to calm the market has had the opposite ­effect,” said Bernard Aw, market analyst at IG Group. “The panic is spreading, and authorities appear to be grasping at straws to hold back the tide.”

One worry is that bruising stockmarket losses could force millions of Chinese investors to rein in personal consumption, which might hurt companies that sell goods in China.

The government’s struggle to prevent distress from spreading is a sign of how much it fuelled runaway investor optimism in its push to drive share prices higher.

Just a year ago, stocks were languishing at multi-year lows, and few Chinese savers saw stocks as a good investment. The real ­estate market, where many Chinese put their money, was slowing. Beijing hoped to use a rallying stockmarket to boost the economy and speed economic reform.

The stockmarket’s rally began in November, when Beijing cut interest rates and granted international investors unprecedented access to its main stockmarket in Shanghai. Local investors interpreted the move as a vote of worldwide confidence.

Along the way, though, Chinese authorities put more power in the hands of millions of individual investors by making it much easier for them to buy shares with borrowed money. Individual investors account for 80 per cent of all transactions in Chinese markets.

The resulting spike in margin loans has come back to haunt Beijing. Outstanding margin loans reached a record 2.27 trillion yuan as of June 18, up from 1.03 trillion yuan at the start of this year — and a roughly fivefold increase in the past year.

When investors began to dump stocks in mid-June, that margin debt created a spiral down.

Beijing seems to have been caught off-guard by the monster it helped create.

[greengiraffe]

China share turmoil sparks backlash against President Xi Jinping
MARK MAGNIER THE WALL STREET JOURNAL JULY 10, 2015 8:09AM

There’s a risk the stock market crisis could trigger social unrest and hurt Xi Jinping’s authority. Source: News Corp Australia

President Xi Jinping got the credit as China’s stock markets revved up. Now their unravelling is inviting rare finger-pointing at his forceful rule and putting his far-reaching economic goals at risk.

Vibrant stock markets are at the centre of Mr Xi’s plans for an economic makeover, intended to help companies offload huge debts, reinvigorate lethargic state enterprises and entice more foreign investment. Some economists called reviving the moribund markets among his most consequential reforms in the more than two years since coming to power. Investor blogs talked of “the Uncle Xi bull market.”

But with the markets having lost around a third of their value in the past month, and the government appearing to panic in its response to the drop, some people are starting to voice doubts about Mr Xi’s autocratic leadership style.

Sun Liping, a sociologist at Tsinghua University, took to his social-media account to say the stockmarket crash has exposed crucial flaws in Mr Xi’s highly centralised approach to government, including a lack of financial expertise and a pervasive instinct among subordinates to obey superiors.

Start of sidebar. Skip to end of sidebar.

MORETurmoil tests Beijing reforms
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“Power has limits,” he wrote.

The criticisms amount to a rare backlash for a leader with an eye for publicity and who so commandingly put his stamp on the Communist Party, the military, economic policy and other areas. At the same time, Mr Xi is facing resistance from officials and the business community upset with the slowing economy and how he has tried to concentrate power in his hands, among other policies.

Although Mr Xi faces no immediate challenge to his authority, there is a risk that the stock market crisis could trigger social unrest and hamper his efforts to promote key allies at the next big leadership reshuffle in 2017. His government has placed a priority on quashing dissent and unrest, and recently passed a law that broadly defines national security threats to preserve the party’s leadership.

The sudden doubt in China’s leadership threatens to undermine Mr Xi’s broad-ranging agenda to keep raising standards of living and transition to consumer economy.

“The market sell-off is definitely the largest challenge that the new administration has faced,” said Victor Shih, a China expert at the University of California, San Diego. Chief among the weaknesses exposed, Mr Shih said, was the ineffectiveness of Mr Xi’s pledge to limit bureaucratic interference and give markets greater scope.

“He’s trumpeted reform for the past couple of years but a lot of so-called reforms have gone out the window with this dramatic, dramatic government intervention in recent days,” Mr Shih said.

The government’s scattershot efforts, which have included cutting interest rates and ordering state-run companies and brokerages to buy and hold stocks, appeared to make headway yesterday after floundering for weeks. The benchmark Shanghai Composite Index rose 5.8 per cent, the biggest daily gain in six years, while other indexes saw smaller rises.

Yesterday, Chinese police visited the nation’s stock regulator and vowed to investigate any market manipulation.

Just how damaging the stock meltdown ends up being for Mr Xi will depend on how quickly the market recovers and whether Beijing summons the unity to marshal its significant resources. The administration still has some $US4 trillion in foreign reserves, and its policies to promote innovation and entrepreneurship offers a road map out of the slow-growth morass for many ordinary Chinese, said Cheng Li, a senior fellow with the Brookings Institution and author of a book on Chinese leadership.

“This is a very critical period, a test of public confidence, leadership capacity and how the international community views China,” Mr Li said. “This week is pretty bad and if it lasts a few more weeks, it will be terrible, but we need to see how it unfolds.”

Mr Xi took charge in late 2012, presiding over a group of leaders and senior officials applauded by China’s elite for wanting to shake things up. His central-bank governor and finance minister have argued for relying more on market forces and loosening controls on currency and cross-border investments.

A potential casualty of the concerted intervention, some economists said, is Beijing’s goal of getting the yuan named as a global reserve currency when the IMF conducts a review late this year. The effort relies on opening financial markets wider to foreign investors, whose confidence in the wake of the massive stockmarket intervention has yet to be gauged.

One of Mr Xi’s most popular policies, an anticorruption campaign against party officials high and low, has also run into headwinds. Businesses and even other Chinese leaders complain that the purge is paralysing the bureaucracy, frustrating companies trying to gain approvals for projects. It has also antagonised some senior party figures who feel it is splitting their ranks and distracting the leadership’s attention from the economy.

That’s why, some political insiders said, that the trial of Zhou Yongkang, the former security chief and most senior figure caught in the antigraft campaign, was held in secret and given little play in state media at its conclusion.

Also battling from within are influential state industries that dominate large swathes of the economy and which have managed to delay the government from issuing broad guidelines for consolidation. Much of that reform program is premised on selling more shares to the public and converting corporate debt to equity, reforms that economists said are being setback by the efforts to stabilise the markets.

Some economists said driving Beijing’s aggressive prop-up of the markets is fear of contagion and social instability as accounts fuelled by debt started to rapidly lose value. Many of those hit hardest in the past few weeks have been individual investors with relatively small accounts — the majority of Chinese investors — some of whom have bought stocks on margin or with proceeds from real estate, another area hard hit by the economic slowdown.

A 26-year-old graduate student at Peking University who would give only his surname, Zhou, said he has lost around 50,000 yuan ($US8,050) on stocks in the past few weeks, leaving him depressed and scrimping on meals. Mr Zhou, who asked not to use his first name since his parents don’t know he has been trading in stocks, said he blames the steep decline on the government, which did little to temper frenzied buying, and on state media for playing cheerleader.

“The People’s Daily made things worse by saying that the 4,000 level was just the beginning of the bull market,” Mr Zhou said. “50,000 yuan is a big deal for a student. Some of this was money my parents gave me for my wedding.”

Yesterday, the Shanghai market closed at 3709.33.

Wall Street Journal

[greengiraffe]

Jul 9 2015 at 3:54 PM Updated Jul 10 2015 at 5:44 AM
The invisible hand behind China's sharemarket bubble

President Xi Jinping, right, and Premier Li Keqiang arrive for the second plenary session of China's parliament, the National People's Congress, in Beijing in March. The pair overseen a policy of growing engagement with the sharemarkets, but it has come at a cost. Getty Images
by Brian Bremner and Enda Curran

In China, the invisible hand of the market sometimes needs help from the iron fist of the state. That's certainly true after a meltdown vapourised $US3.5 trillion in the value of shares traded on the Shanghai and Shenzhen exchanges.

President Xi Jinping's government isn't being subtle in its campaign to reflate the bubble it had a big role in creating. The government has suspended initial public offerings and eased rules on margin loans, even allowing investors to use their homes as collateral to borrow money to buy stocks.

On June 27, the People's Bank of China cut its benchmark interest rate and the amount of reserves certain banks are required to hold. Days later, it offered financial support to a group of 21 brokerages that have pledged to buy 120 billion yuan ($US19.3 billion) worth of shares and hold them for a year. On July 8, China's securities regulator banned major company shareholders (those with stakes exceeding 5 per cent), corporate executives, and directors from selling their shares for six months.

So far, the government's moves have had little impact. Since peaking on June 12, the Shanghai Composite Index has fallen almost 34 per cent, dropping more than 5 per cent on some days. The selling pressure in China has been so severe that by Thursday, more than 1,400 companies had halted trading in their stocks on mainland exchanges, freezing more than $US3 trillion worth of shares, or 50 per cent of the stock market capitalisation. On July 7, Hong Kong followed the mainland exchanges into bear market territory.

The stock market rout, the worst mainland market slump since 1992, has been an embarrassment to Xi and Premier Li Keqiang, who have vowed to push through more than 300 reforms aimed at reducing state intervention and letting market forces play a bigger role in China's $US10 trillion economy.

As Chinese stocks made a 150 per cent run from July 2014 through June 12, state-controlled media both urged individual investors to buy and characterised the stock boom as an affirmation of Xi's policies. "This is a real testing moment for the leadership," says Zhao Xijun, deputy dean of Renmin University's School of Finance. "The evaporation of fortunes of more than 80 million individual investors would pose unthinkable social problems for the country."

Then there's the risk that the stock market bust will complicate efforts to bail out the country's heavily indebted property developers, corporations, and local governments. A credit binge and supercharged spending on infrastructure and housing delivered 10 per cent annual economic growth from 1980 to 2012. Now the economy has decelerated to about 7 per cent annual growth and is awash in debt. Government, corporate, and household borrowing totalled $US28 trillion as of mid-2014, or about 282 per cent of the country's gross domestic product, according to McKinsey.

A thriving stock market figured into Xi's bigger effort to steer China away from its reliance on bank lending and develop a diversified financial sector with vibrant equity and bond markets to fuel growth. There has been some progress. Most interest rates, except for the benchmark deposit rate, are now set by market forces, and Xi's drive to root out government corruption continues to roll ahead.

A trading link was established last year between the Shanghai and Hong Kong exchanges to allow foreigners greater access to Chinese stocks. In a country where Mao Zedong once derided market-leaning party members as "capitalist roaders," there are today more individual stock investors, 90 million, than Communist Party members.

Unleashing market forces is what Western economists and the International Monetary Fund have long prescribed, but Minxin Pei, a government professor at Claremont McKenna College, says another agenda may be at work. Beijing goosed the stock market to shore up public support in a slowing economy and give debt-burdened companies a lifeline to equity financing, he says. Chinese companies have raised $US72 billion this year in initial and secondary stock offerings, data compiled by Bloomberg show. "Many companies that should go out of business have tapped the stock market for funds," Pei says.

At the mid-June high, shares on the Shanghai Composite Index were three times more expensive than any of the world's top 10 markets based on estimated earnings. Even after the recent plunge, the median valuation of stocks on the Shanghai and Shenzhen exchanges is almost triple that of the companies listed on the Standard & Poor's 500-stock index.

Margin account balances, a measure of shares bought with borrowed money, are still sizable at 1.05 trillion yuan as of July 8, according to the Shanghai Stock Exchange.

So far the government-led rescue mission has mostly helped prop up the shares of mainly big state-owned enterprises such as PetroChina, China Merchants Bank, and China Southern Airlines. Selling in the broader market, particularly with small-cap stocks, remains relentless. The CSI Smallcap 500 index is down more than 40 per cent since June 12.

The government's cheerleading as stocks rose – and heavy-handed response when they collapsed – has hurt its credibility with global investors. "This saga shows that the leadership has not dealt with financial reform and liberalisation well so far," says Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group. And even if the rescue mission works, Claremont McKenna's Pei says China will succeed only in postponing a necessary and painful corporate reckoning: "The cleanup bill will be much bigger," he says.

Ultimately, Xi's government may be making a common mistake among novice investors: doubling down on a losing trade. "The more resources authorities commit to propping up the stock market, the more they ratchet up the potential fallout risks should the market continue to collapse," says Andrew Wood, an analyst at BMI Research. The government-controlled media, ever optimistic, continues to make the case for buying shares. "Rainbows always appear after rains," said a recent editorial by the People's Daily, the voice of the Communist Party of China.

At least one Western investment bank agrees. Kinger Lau, China strategist at Goldman Sachs, predicts the large-cap CSI 300 index will rally 27 per cent over the next 12 months. "China's government has a lot of tools to support the market," Lau says. "We are still positive."

Financial Times

[CityFarmer]

I am not sure the definition of the long time? One thing for sure, the market volatility will sustain for a while...

China stems stocks rout, but market faces lengthy hangover

SHANGHAI — The increasingly frantic attempts by Chinese authorities to stem a stock market rout were finally rewarded yesterday as Chinese shares staged their best one-day gain in six years, but analysts warned the costs of heavy-handed state intervention are likely to weigh on the market for a long time.
...
http://www.todayonline.com/chinaindia/ch...y-hangover

[corydorus]

Now the Index is kind of skewed. With more than half halted, main shareholders more than 5% cannot sell, some cases they are even force to buy back, easing money loan term, provide loans to brokerage to buy. They even sent out police to arrest shortists. I would say the Index is no longer the same index.

But the Market did Crash ... whether it will go back up is anyone guess. But for sure the intervention is so great, it has become a CCP Index rather than ShangHai Index. Index holders may have a strange time realising their value.