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

[greengiraffe]

http://www.wsj.com/articles/china-stocks...1438013628

China Stocks Tumble 8.5%, Calling Into Question Beijing’s Ability to Prop Up Market
Chinese shares suffer their biggest one-day percentage drop in more than eight years
ENLARGE
By LINGLING WEI in Beijing and CHAO DENG in Hong Kong
Updated July 27, 2015 1:25 p.m. ET
47 COMMENTS
The Chinese government is struggling to contain the collapse of a stock-market rally it helped engineer, announcing late Monday that it will step up its purchases of shares to prop up sagging indexes.

Chinese shares suffered their biggest one-day percentage drop in over eight years Monday, wiping out hundreds of billions of dollars of market value and putting an end to a three-week period of stability Beijing had achieved by intervening with stock purchases and other steps to stop the market’s slide.

The Shanghai Composite Index, which includes China’s biggest companies, fell 8.5%, to 3725.56, with the losses coming mostly during a hectic last two hours of trading on Monday. More than two-thirds of the 1,114 companies in the index fell by the 10% daily maximum allowed under market rules. The smaller Shenzhen Composite Index fell 7%, to 2160.09, bringing its losses to 31% since it hit a record in mid-June.

The big declines show investors have become skeptical of the market and the government’s ability to control its slide. China’s top leaders, currently gathering for their annual summer talks at the northern seaside town of Beidaihe, will likely look at what further action they can take to bring stability back to the stock market and how to prevent the rout from spreading to other parts of the economy.

China's stock market dropped sharply on Monday. Moneybeat's Paul Vigna discusses the global implications. Photo: Getty
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“The cat is out of the bag when it comes to China, and the collapse in the stock market overnight has confirmed that Beijing’s stabilization policies are not working,” said David Madden, market analyst at brokerage IG. “I feel that confidence will be difficult to get back, no matter how much money they throw at it.”

For now, the problem is largely a domestic one for China. Shares in Asia, Europe and the U.S. also pulled back, but the relatively limited exposure among international investors to Chinese stocks kept the panic from spreading.

Japan’s Nikkei Stock Average fell 0.9%, the Stoxx Europe 600 closed down 2.2%, its biggest one-day percentage decline in a month, while the S&P 500 slumped 0.6%. Commodities, including crude oil and copper, dropped amid fears about waning demand from China.

A spokesman for China’s top securities regulator said late Monday night that the government will increase its buying of stocks in a bid to stabilize the market. The comments appeared to be aimed at speculation the government could soon pull back on its support for the market, speculation that had contributed to the day’s big losses.

Zhang Xiaojun, spokesman at the China Securities Regulatory Commission, said the government’s stock-buying entity didn’t exit the market and will increase its holdings of stock as appropriate. He also said the regulator isn’t ruling out the possibility that big individual investors were coordinating to dump shares in a “malicious” fashion that contributed to Monday’s plunge.

Further intervention by the government could raise more concerns about Beijing’s resolve to open up its financial system to greater competition and cross-border capital flows, a stated government goal as the leadership seeks to turn the Chinese yuan into an international currency. Current and retired Communist Party officials are expected to discuss the next course of action for overhauls at the conclave in Beidaihe, according to government advisers.

Despite slowing economic growth, China’s stock market soared in the first half of the year—the Shanghai Composite had climbed 60% this year through mid-June—fanned by policy changes that made it easier to buy shares with borrowed money and upbeat editorials in state-run media. Many of the buyers have been individual investors, who account for about 80% of the transactions in China’s stock market, a far greater share than in developed markets.

China’s Market in 8 Charts
ENLARGE
Beijing has hoped that the country’s stock market would become a reliable venue for companies to raise capital, reducing their dependence on funding from state-owned banks. More recently, though, fears of a collapse in investor confidence have come to the fore.

“As Wen Jiabao once put it, ‘Confidence is more important than gold,’ ” one government adviser said, referring to a former Chinese premier. “That’s the state of mind for the current leadership as well.”

The stock rally this year had been one of the few bright spots in China’s economy. The intervention to rescue the market suggests leaders are concerned not only that the disorderly selling could spread to other parts of the financial system, but that it could signal a wider loss of faith in the government’s ability to manage the economy.

Some economists question the wisdom of the all-out effort to protect stocks, saying that risks of significant damage to China’s broader economy are small. One reason, they said, is that much of Chinese household wealth sits in banks and is tied up in real estate, with only a small portion invested in stocks.

The market-rescue measures could mean more harm down the road, they said, by reinforcing the idea that the government will come to the rescue whenever there is a crisis, undermining the progress China has made in allowing more room for risk in its financial system.

Since early July, the Chinese government has resorted to measures aimed at stemming the slide in stocks that had wiped out roughly $3 trillion in market value in just three weeks beginning in mid-June. The steps, including a stock-purchasing program financed by the country’s central bank and commercial banks and a halt to new stock listings, helped restore some calm in the following weeks.

Monday’s plunge all but wiped out the market’s gains since the recent market trough on July 8. The Shanghai Composite is down 28% since hitting a more than seven-year high on June 12. Among stocks falling by the 10% daily limit Monday were those of major state-owned companies such as oil firm China Petroleum & Chemical Corp., insurer China Life Insurance Co. and Bank of Communications Co., one of China’s top banks. Still, the Shanghai Composite is up 15% this year, while the Shenzhen Composite has gained 53%.

There was little sign of market panic early Monday. Stocks initially rose before finishing the morning session at 11:30 a.m. down slightly from Friday’s closing level. When trading reopened at 1 p.m. after the normal daily break, they traded within a narrow range until 1:49 p.m., when the steep slide began.

Investors look at stock information at a brokerage house in Qingdao, Shandong province, on Monday. China stocks plunged 8.5%, their biggest one-day percentage drop in more than eight years. ENLARGE
Investors look at stock information at a brokerage house in Qingdao, Shandong province, on Monday. China stocks plunged 8.5%, their biggest one-day percentage drop in more than eight years. PHOTO: REUTERS
ENLARGE
Dai Yiyun, a 28-year-old office secretary at a state-owned company in Shanghai, saw her stockholdings shrink in value within the half-day of volatile trading. At 2 p.m., four of the 10 stocks in her portfolio had gained during the day. By 2:15 p.m., all of them had fallen by the 10% maximum.

“I never expected the market to turn 180 degrees around early afternoon,” said Ms. Dai, who lost 10,000 yuan ($1,611) on Monday. “I’ve lost hope that I can make money in this crazy market….Logic simply doesn’t exist in China’s stock market.”

Beijing helped bolster the market about a year ago by easing credit conditions, which in turn encouraged investors to buy shares with borrowed funds, known as margin trading. More access was granted to foreign investors via a trading link to the Hong Kong market. Chinese stocks more than doubled in value in a year.

But China’s stock-investing public rushed for the exits starting in mid-June, when the government intensified a clampdown on margin trading.

Outstanding margin loans were at 1.5 trillion yuan Friday, down from a record of 2.3 trillion on June 18, according to the latest available information from data provider Wind Information Co. Analysts said unofficial lenders, such as peer-to-peer Internet financing sites, have lent hundreds of billions of yuan more to investors.

In recent weeks, China’s securities watchdog has been cracking down on such lightly regulated credit providers. In a statement after the market closed Monday, China’s securities regulator said it had sent enforcement teams to two companies that run stock-trading platforms to check if they are following its rules.

Analysts said Beijing still has firepower to support the market. China’s central bank, which has already been indirectly injecting funds to help securities firms buy shares, could further increase funding.

Chinese authorities could also delay unwinding the existing rescue measures for as long as needed, by potentially prolonging the suspension of new stock sales and continuing to mandate that anyone holding 5% of a company can’t sell shares for six months. Meanwhile, the Finance Ministry could pitch in by lowering the stamp duty on stock sales, Chinese officials said.

“The [government’s] hope is to get the stock market back up long enough for economic growth to catch up, which would then enable it to carry out its pledged structural reforms to make the growth more sustainable,” said economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based brokerage.

Others found the apparent lack of government intervention Monday telling.

The authorities may want to “test whether the market has recovered its resilience,” said Fu Xuejun, a strategist at Huarong Securities. “The government wants to use state funds to stabilize the market, not to prop it back to 5,000 points overnight.”

—Yifan Xie and Gregor Stuart Hunter contributed to this article.

Write to Lingling Wei at lingling.wei@wsj.com and Chao Deng at Chao.Deng@wsj.com

[greengiraffe]

OPINION Jul 28 2015 at 7:04 AM Updated Jul 28 2015 at 7:04 AM

Why Beijing's bid to prop up China's share market appears doomed to fail

The Chinese share market rests on a rickety edifice of margin loans, which are estimated to total several trillion yuan. Reuters


by Karen Maley
There are three key reasons why Beijing faces a long - and likely unwinnable - battle as it tries to shore up its ailing share market.

In the first place, even though Beijing has already spent hundreds of billions of dollars buying shares, investors continue to question its determination to prop up the market.

Indeed, Monday's sell-off in Chinese markets, which ended up with the Shanghai Composite Index plunging 8.5 per cent in its biggest drop since 2007, appears to have been triggered by fears that Beijing was scaling back its share purchases.

Investors were also jittery that China's government could even be about to test whether the market was strong enough to support itself.

China shares tumbled 8.5 per cent on Monday.
China shares tumbled 8.5 per cent on Monday.
RICKETY EDIFICE OF MARGIN LOANS

But there is a second, and much more worrying, reason why Beijing's efforts appear doomed to failure.

That is that the Chinese share market rests on a rickety edifice of margin loans, which are estimated to total several trillion yuan.

Indeed, it was the enthusiasm of Chinese investors – particularly the less sophisticated retail punters – for margin loans that helped push the Shanghai index up by a staggering 150 per cent from the beginning of the year to its June peak.

The amount of money borrowed from brokers to invest in the share market soared from 400 billion yuan ($88 billion) in July 2014 to 2.3 trillion yuan at its peak almost a year later. What's more, investors possibly borrowed as much as 2 trillion yuan through other channels to pour into shares.

Typically, Chinese investors are able to borrow $1.25 for every $1 of cash they hold, which enables them to leverage their exposure to the share market. The problem is that if the share market falls sharply, brokers issue "margin calls" asking investors to top up their cash. If they fail to do so, the broker will liquidate their shares.

Because many Chinese households waded into the market when it was at its peak, they have now either received, or are close to receiving, margin calls. And even though official margin loans outstanding have dropped to 1.4 trillion yuan from 2.3 trillion yuan, the huge volume of margin loans that still need to be unwound is casting a huge shadow over the market, leaving it extremely vulnerable to savage sell-offs.

The risk is that the market drops so precipitously that it's not only investors with margin loans that have their shares sold – which pushes the market even further - but that the brokers themselves suffer losses. The pain could even extend as far as the country's banks.

GROWTH OUTLOOK

Finally, investor confidence in the Chinese share market has been undermined by renewed fears about the country's growth outlook. This was highlighted on Monday with the release of official figures showing that China's industrial profits fell 0.3 percent in June from a year earlier, as falling prices squeezed profit margins.

The slowdown in Chinese growth and the spread of deflationary pressures partly stem from problems in the country's real estate market – which is estimated to account for just over one-quarter of the economy when construction, steel and related industries are included.

When demand for housing started to pick up just over a decade ago, the mining and manufacturing sectors were quick to feel the benefits. The boom in construction of new housing led to rising demand for steel, copper and other materials, as well as for construction equipment and household appliances. In turn, the makers of those products boosted investment to meet the stronger demand.

But in the past few years, demand for housing has hit a plateau, leaving many developers saddled with unsold inventory. In turn, industries that are reliant on construction have suffered from weaker demand, and have been forced to cut output and prices.

Adding to the pressures on growth, Chinese commodity producers – particularly the big state-owned enterprises – have been hard-hit by the collapse in global commodity prices. They've responded by cutting back their spending, which has led to weaker demand both for machinery and equipment, and also for the services of transport and utility firms. This has added to the deflationary pressures in the economy.

The problem is that although the impressive run-up in the Chinese share market to its June peak bore little connection with the underlying performance on the Chinese economy, its collapse is likely to worsen the country's economic woes.

That's because the atmosphere of gloom is likely to spread well beyond the 90 million Chinese who like to dabble in the share market. Even those who haven't lost any money are likely to respond to the steep share market slide by cutting spending and becoming more cautious.

[BlueKelah]

Analyst Who Predicted Bottom for Shanghai Stocks Sees Further 14% Plunge

Chinese stocks will decline by an additional 14 percent over the next three weeks as the market demonstrates a trading pattern that mirrors the U.S. crash in 1929, according to Tom DeMark.

The Shanghai Composite Index will sink to 3,200 after plunging 8.5 percent Monday to 3,725.56 in the worst selloff in eight years, DeMark, who predicted the gauge’s bottom in 2013, said on Monday. That would extend its decline since a June 12 peak to 38 percent. The index’s moves since March are tracking those of the Dow Jones Industrial Average in 1929 when the gauge lost as much as 48 percent, he said in a phone interview.

read more here

[greengiraffe]

why bother when everything is interlinked to a pile of conjobs...

China holds US Treasuries and Euro Bonds. Temasek holds big position in China stocks... everyone will make sure that their mates will be looked after...

noone wins when deflation sets in as human beings can't take pains as seen from the recent poker bluff by Greece...

Analyst Who Predicted Bottom for Shanghai Stocks Sees Further 14% Plunge

Chinese stocks will decline by an additional 14 percent over the next three weeks as the market demonstrates a trading pattern that mirrors the U.S. crash in 1929, according to Tom DeMark.

The Shanghai Composite Index will sink to 3,200 after plunging 8.5 percent Monday to 3,725.56 in the worst selloff in eight years, DeMark, who predicted the gauge’s bottom in 2013, said on Monday. That would extend its decline since a June 12 peak to 38 percent. The index’s moves since March are tracking those of the Dow Jones Industrial Average in 1929 when the gauge lost as much as 48 percent, he said in a phone interview.

read more here

[greengiraffe]

China capitalism will grow up and CCP is too big to fail. Noone will allow CCP and China to fail since there is no benefits whatsoever... setback is permissible so that China will not overpower and upset the power balance in the world...

China’s market turmoil: Beijing in $11bn market rescue
THE AUSTRALIAN JULY 29, 2015 12:00AM

Scott Murdoch

China Correspondent
Beijing
Andrew White

Associate Editor
Sydney


China's blurry warning signs

The Chinese government is under pressure to keep its unprecedented equity market support measures in place, as the nation’s central bank yesterday pumped 50 billion yuan ($11bn) into the domestic financial system to ­reduce the chance of a liquidity crisis, but investors remain nervous about the future.

China’s benchmark Shanghai stock index closed down 1.68 per cent, slashing losses from earlier in the day but still defying government efforts to improve sentiment after a plunge on Monday. The Shanghai Composite closed down 1.7 per cent at 3663 points after falling as much as 5.1 per cent ­following an 8.5 per cent tumble on Monday, its biggest one-day fall since 2007.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, ended down 2.24 per cent, or 48.39 points, at 2111.7.

China’s shares bounced back from Monday’s 8.5 per cent plunge as the nation’s top securities regulator tried to allay concerns by saying that the government would step up its ­purchases of stocks through ­state-owned fund the China Securities Finance Corporation. Even so, this has prompted questions about how sustainable Beijing’s efforts to stem selling will be.

Start of sidebar. Skip to end of sidebar.

MOREInvestor ignorance breeding panic
End of sidebar. Return to start of sidebar.

Despite the better performance, nearly 300 stocks still fell by at least 10 per cent, the daily ­maximum limit put in place by the Chinese government. In Australia, the S&P/ASX 200 lost 5.2 points to close at 5584.7, while the All Ordinaries closed at 5571, down just 8.2 points.

In Hong Kong, the Hang Seng index was up 1.8 per cent and a gauge of Chinese firms listed in the city rose 0.9 per cent.

Chinese regulators yesterday said it believed that “malicious” sellers were behind the Monday session and promised to crack down on investors found to be ­manipulating the market.

Andrew Forrest, the billionaire chairman and founder of Fortescue Metals, which is heavily ­exposed to China, said he was ­unfazed by China’s stockmarket or economic outlook. “I have had the opportunity to spend some time with some very senior ­Chinese industrialists and they are telling me that the underlying economy could be stronger but is still strong and that several sectors are as strong as they have ever been,” he said yesterday.

However, in Beijing, analysts and investors said the market volatility was worrying and urged the government to maintain its current support.

Taida Securities deputy director Liu Jingde said investors ­remained concerned that the ­Chinese government’s intervention in the equity markets was not strong enough to resist another sell-off in the next few weeks. “The plunges that we have seen is caused by the weakness of national rescue operation,” he said.

“The slump of the index was a huge blow to the investors’ confidence. Unless the government pumps capital into the market to help stabilise it, then I think we are going to see more, larger falls.”

Financial and Monetary Institute of Renmin University vice-president Zhao Xijun said the government’s decision to hold off on allowing new company floats on to the market was not enough to inject confidence into retail investors consumer sentiment levels, currently at an all-time low.

Mr Zhao said investors were worried that the Chinese economic growth was not as strong as reported by the government, while the powerful manufacturing sector was also struggling.

Both public and private measures of the Purchasing Managers Index, which charts manufacturing output, were showing signs of weakness over the past few months.

A new PMI, published by Caixin, this week showed manufacturing was now at the weakest point in 14 months, which spooked investors.

“Investors are worried that the government will quit the rescue operation after the bailout works. Many people think that last week’s rebound was just a ‘flash in the pan’,” Mr Zhao said.

“China’s macroeconomic situation is more complicated. The weakness in overall domestic and external demands take manufacturing deep into trouble, so investors are not sure on the stock market outlook.”

He noted that although China’s big listed companies were all state-owned enterprises and securities companies were also mostly state-owned, retail investors were still the major investors.

“There is no strong and mature institutional investor. In general, retail investors are not professional, they are vulnerable to external factors and that easily leads to volatility of stockmarket,” Mr Zhao said.

Yingda Securities chief economist Li Daxiao said the high rates of leverage in the Chinese market made it vulnerable to the current major bouts of volatility. It is estimated that the rate of margin financing has fallen by nearly a third over the past month, but the loans are still worth at least 5 trillion yuan.

“If there was no rescue by the government, that may have led to more intense market turmoil,” he said. “The falls have happened because there is still overvaluation plus there is still a large amount of leverage evident.”

China Galaxy Securities senior economist Zuo Xiaolei said investors were keen for the government to remain “supportive” of the equities markets, despite its ongoing promise to open up financial markets to the rest of the world.

“The government still needs to keep the ‘rescue’ operation. in place,” he said.

“But it should not just focus on the change of index. If the index starts to rise that should not be treated as the signal of rescuing the market, because stabilising the market does not means just stabilising the index.

“The government should be working to prevent huge volatility by increasing trading liquidity, otherwise it could lead to a huge moral hazard.”

Additional reporting: Wang Yuanyuan, agencies

[FA+TA]

曾淵滄專欄：
大鱷隔山打沉A股 International Predators sink A share from abroad

還記得我在上周提起在新加坡的中國富時A50指數期貨市場嗎？7月17日是中國的指數期貨結算，但我指出，中國股市指數期貨的主戰場在新加坡，新加坡仍有大量未平倉的合約，要等到7月30日才結算，國際大鱷根本沒興趣在中國內地炒中國期指，他們在新加坡活動，昨日我們的確可以看到國際大鱷的能力，趕在新加坡A50期指結算前，創造出滬綜指八年內最大的單日跌幅，跌8.48%，2,000股份跌停板，若沒有停板制，滬綜指跌幅可能不止8.48%。
Do readers still remember that I mention Singapore FTSE China A50 index futures market last week? July 17 is China 's index futures settlement , but I've pointed out that the main battlefield of China's stock market index futures is in Singapore; Singapore still has a lot of outstanding contracts to settle until July 30. International speculators are not interested to speculate China Index in mainland China, their activities are in Singapore. Yesterday, we can actually see the ability of international predators; before settlement of A50 futures in Singapore by July 30, create the largest single-day decline of 8.48 percent in eight years in the benchmark Shanghai Composite Index; 2,000 shares fall and reached daily limit. If there is no system circuit breakers , the Shanghai Composite Index may fell more than 8.48%.

中國公安不可能到新加坡抓惡意沽空者，相信國際大鱷仍會在新加坡興風作浪，故中國政府要對付國際大鱷，唯一的方法就是大印鈔票，以印出來的鈔票買起股市，那麼股市就可以不斷地升，過去七年美國的債市、股市也是靠印鈔票製造出牛市。
It is impossible for China to catch malicious short sellers in Singapore. I believe international predators will still making waves in China stock market by short selling in Singapore. The only way for Chinese government to deal with international speculators is massive printing of money to support the stock market, then the stock market can continue to rise. This is what the US create a bull market in their bond and stock market over the past seven years by printing money.

大媽恐慌程度更高

對膽子大的人，昨日如此大的跌幅是有撈底博反彈的條件，但膽子更大的人，可能在昨天一早就趁勢追沽，膽子小的人，也許要等到期指結算後再打算，長期投資者不必理會升跌，只考慮現價是不是有價值投資的條件，有就進場。中國非官方PMI數據不佳，這不是唯一利淡A股因素，而美股大幅下跌也改變了國際投資者的情緒，改變了資金流向，改變了國際大鱷的戰略、部署。

恒指昨跌幅3.09%，50隻成份股全部下跌，幸本地藍籌股的表現仍比較強，長實（1113）、中煤（003）中電（002）跌幅不逾1%，H股跌幅也比A股小，看來中國大媽恐慌程度還較高。

[greengiraffe]

Fact not myths:

http://www.cnbc.com/2015/07/28/global-in...lunge.html

Global investors feel little impact from China market plunge
China shares just a small portion of world stock holdings
John W. Schoen | @johnwschoen
5 Hours Ago
CNBC.com

Stock market crashes always make investors nervous.

But despite China's outsized role in the global economy, the recent gyrations in its stock market will have limited direct impact on global investors. That's because China's relatively young equities market makes up a small share of overall global stock holdings.



Chinese shares fell again Tuesday, as Beijing scrambled to try to contain the selloff that has touched off fears about wider financial fallout in the world's second-largest economy. After dropping more than 8 percent on Monday, Chinese regulators were reportedly buying stock to stabilize prices and the central bank pumped cash into the system to calm the turbulent financial waters.

The recent crash follows a dizzying bubble that saw the Shanghai composite index soar from just above 2,000 in July 2014 to a peak of nearly 5,200 in June 2015, before falling back to 3,500 in early July.


Despite the global jitters emanating from China's stock market moves, the value of publicly owned shares traded there represents about 7 percent of the world's total, according to the latest figures from the World Bank.

The fallout around the world also will be contained by Chinese restrictions on stock ownership by foreigners. While the Shanghai-Hong Kong Stock Connect has recently opened up access a bit, the total allocation for foreigners is just 3 percent of the market, according to a report from Bloomberg Intelligence.

To be sure, China's recent stock market volatility has badly damaged the confidence of Chinese investors. But the latest surge and plunge is not the first time they've seen the market rocked by wild moves. Like other smaller stock markets in developing countries, China's exchanges are often prone to wider, more frequent swings than larger, older stock markets in New York, London and Tokyo.


Still, the market's latest selloff poses major problems for China as it seeks to transition its economy from heavy dependence on government investment to a greater reliance on consumer-driven growth. Rising wages have created wealth for individual Chinese investors, but the latest losses have severely dampened consumers' outlook and wiped out millions in households' personal savings.

"Retail investors' confidence in the mainland market is very weak," said Steven Leung, a market analyst in Hong Kong, told Reuters.


Retail investors only hold 22 percent of the market, but they account for the majority of trading volume, according to the Bloomberg report, which also notes that low stock dividends lead many Chinese investors to chase market moves "rather that focus on the fundamentals of profit and loss."

Institutional investors have just 11 percent of the market, with the rest—some 60 percent—held by state-owned parents and other investors that don't typically trade their holdings, according to the report.


John W. Schoen
CNBC.com Economics Reporter

[greengiraffe]

Jul 29 2015 at 5:42 PM Updated Jul 29 2015 at 6:08 PM

Chinese sharemarket: Are the markets just playing catch up?

by Philip Baker
For six years between 2008 and 2014 the Chinese sharemarket went nowhere. But in the past 12 months it has certainly made up for the lost time.

So despite the savage fall over the past few months, is it still, overall, just playing catch up to other major sharemarkets?

Between July 2008 and July 2014, the Shanghai Composite index fell 27 per cent, while the S&P ASX 200 index gained 11 per cent. The S&P 500 index rose almost 60 per cent.

Throw in those dividends and China's sharemarket fall was brought back to 17 per cent while the return in the local market was boosted to 60 per cent and raised to 82 per cent for Wall Street investors.

Despite the recent falls, this calender year the Chinese sharemarket is still up 13 per cent.
Despite the recent falls, this calender year the Chinese sharemarket is still up 13 per cent. Mark Schiefelbein
So there was some lost ground to be made up.

And over the past 12 months Chinese shares did just that. In spades.

The Shanghai index has gained 68 per cent, while the local market has gone sideways and the S&P 500 has gained just 6 per cent. This calender year the Chinese sharemarket is still up 13 per cent.

All up the rise in the Shanghai index since the middle of 2008 is 45 per cent, 13 per cent for the top 200 index in Australia and 65 per cent for the broader US index.

Impressive, but clearly not the stand-out.

Yet the fall of around 30 per cent since the middle of June has got investors spooked.

It has certainly been savage.

The markets know the story. Its elements have been beating investors over the head amid talk that China's growth is slowing.

There have also been some big moves in the past, so this is nothing new for seasoned investors.

The Chinese sharemarket more than halved from mid-2001 to mid-2005 mainly because of fears that non-tradeable shares may suddenly be dumped onto the market.

In July 2005, shares hit their lowest level for eight years, even though the economy was booming.

GOVERNMENT ACTION ON SHARES NOT UNPRECEDENTED

The government then realised it had to act and sharemarket reform in 2005 triggered another massive rally.

The Shanghai Composite rose more than six-fold between July 2005 and October 2007.

For those that want to take a longer term view amid all the short term noise, HSBC said in a note to clients that companies like Alibaba, Baidu, Samsonite, Samsung Electronics and Advantech are all worth looking at.

The major concern for investors right now seems to surround what sort of impact the fall in the shares will have on the economy.

But history says that during the six years when the sharemarket went nowhere it didn't have an adverse impact on the economy.

Besides, the sell off all happens so fast; consumers simply haven't had time to adjust wealth expectations and spending patterns.

And it's only the last month that has shocked investors.

One reason why the sharemarket doesn't have a high correlation with the economy, according to BetaShares chief economist David Bassanese, is the Chinese stock market capitalisation is still only around 30 per cent of gross domestic product.

That's compared to around 100 per cent in countries such as Australia and the United States.

"And despite their large role in driving share market turnover, the degree of household direct share market exposure is still not especially high by global standards," adds Bassanese.

Valuations of shares aren't nearly as over-stretched as they were during the halcyon days of 2007.

Furthermore, the Chinese government want to have Chinese locally listed shares included in the MSCI's Emerging Market Index as soon as possible.

[CityFarmer]

Singapore GIC is picking up bargains, amid the turmoil. Retail investors are influenced more by greed and fear, thus the swing is larger. Volatility usually means opportunities to value investors...

Singapore's GIC sees opportunities in China market turmoil

SINGAPORE (July 30): Singapore sovereign wealth fund GIC is finding fresh opportunities to invest in the volatile China market amid restrictions imposed by the regulator on investors who own large stakes in Chinese companies.

“It did open up some opportunities for people like us which take a longer-term view and we don't have such kinds of liquidity constraints. That is a clear positive," Lim Chow Kiat, group chief investment officer, told Reuters as the fund unveiled its annual report.
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http://www.theedgemarkets.com/sg/article...et-turmoil

[BlueKelah]

Singapore GIC is picking up bargains, amid the turmoil. Retail investors are influenced more by greed and fear, thus the swing is larger. Volatility usually means opportunities to value investors...

Singapore's GIC sees opportunities in China market turmoil

SINGAPORE (July 30): Singapore sovereign wealth fund GIC is finding fresh opportunities to invest in the volatile China market amid restrictions imposed by the regulator on investors who own large stakes in Chinese companies.

“It did open up some opportunities for people like us which take a longer-term view and we don't have such kinds of liquidity constraints. That is a clear positive," Lim Chow Kiat, group chief investment officer, told Reuters as the fund unveiled its annual report.
...
http://www.theedgemarkets.com/sg/article...et-turmoil

unless they have some sort of clear insider picture in those china companies, it could turn out to be a bad bet like standard chartered. IIRC since 2009 GFC GIC has already bought big chunks of 3 of the 4 top china banks, so they may be trying to add to their positions.

but at least wont end up negative balance like malaysia's 1MDB...