I know Greece is the crisis of the moment but $4 trillion has been wiped off the value of Chinese equities and that's just the ones listed there. he value of many non-traded companies and companies in the process of launching IPOs aren't counted in that so it's likely more. This is HUGE. It's off nearly 6% again and the markets have all day to run. People aren't taking it very seriously because of the giant run up in the last couple of months with the assumption seeming to be that because of the big run up this is fine. It's not though. The prices got that high because people in huge numbers and big institutional investors were still getting in all the way to the top, that's the only way prices cab go higher, it's not all people who got in early and have lost 35% of their profits, people who got in late in the wrong stocks have lost very big. This 35% drop is despite changes to reading rules allowing more leverage and 4 rate cuts in 8 months, all with the express purpose of holding up the market. They've pushed every button they have except pumping money directly into the system. For Australa this is really important, I would expect that a lot of Chinese who have invested in Australian property will be selling up to get their finances in order. They're not a huge slice of the housing and commercial market but they own more than enough that if half of them try and get out all at once it could cause a run on housing in Sydney and Melbourne. I wouldn't be surprised if, because of big leveraged positions, that a lot of Asian institutions have taken big losses that haven't shown up yet. There simply has to be serious repercussions from moves like this, nobody has said contagion yet but I can't believe that there aren't big banks and funds that are trying to figure out how to announce, or hide, the fact that they've lost X billion dollars. Obviously some institutions have made out very well, but that money isn't going to be going back into the Chinese market any time soon. It's a genuine rout and it shows no sign of stopping. I'd keep at least one eye on this when you're thinking about Greece. ________________________________________________ This article is from Friday, before the additional 6% sell off on both the Shanghai and Shenzen composites. http://mobile.abc.net.au/news/2015-...re-market-as-stocks-lose-3-7-trillion/6594316
They're the ones who really loosened increment laws and increased the leverage limits while simultaneously dropping rates again and again. This is happening despite all the levers being pulled.
Very early, but they are pointing towards big losses on pre-trading. I think Chinese QE is coming. Of course it will be too late for most of the ordinary investors. The big institutional investors will be back in to vacuum up that money and then they get to say that everything is back to normal even though most people have been wiped out and there's been a huge transfer of wealth to the big end of town.
Where do you see the pre-trade? China last cut rates on June 27th. The previous rate cuts were on May 11th, March 1st and November 22nd.
I doubt they will sell property here in Australia or anywhere outside of China for that matter to repatriate back to China because the original intent I believe is to keep some of their capital out of China just in case. Secondly its been said that the Chinese have $21t in bank deposit savings and only 10% have gone into the sharemarket.
I thought the idea of buying here for them was to protect themselves against such a local collapse? If so, why would they sell now? But I hope it does damn well happens, we need a housing correction here to teach people a lesson.
In a normal market, you'd expect to see at least a few big firms go to the wall as a result of this. It'll be interesting to see if the Chinese government steps in to prevent that happening, or whether they allow a few failures to prove that they're "real" capitalists and people need to look after their own money.
I'm wondering if it is a play the Chinese Government is planning. I mean the writing has been on the wall for the global economy, they know just as well as anyone else that fiat currency cannot last forever. So years ago when there was a race to the bottom, they would want to race fastest to the bottom. What have we seen, expanding the currency supply: - Building massive ghost cities (planning to use them at some point) - Building a massive rail network that is in a criss cross line pattern across the whole country (high speed trains) - Various exchanges opening up - More global trade and free trade agreements Looking at it, literally pumping more currency through their system and allowing it to buy assets overseas. What China is really doing is diversifying its holdings. Whats the point holding so many trillions in USD if you can't spend it in the future. So what you have is massive buying of assets across the world. Not unusual to hear some farms here going to chinese companies, Hotys was sold to a chinese company, various chinese developers building apartments here, heard some massive hotel was sold to chinese. I think its smart, we are just literally seeing the rampant buying to reduce risk by holding assets in other countries and diversifying. You may ask why are they buying so much. Well literally they know it really doesn't cost them anything to expand their currency supply, just like any other central bank. Their property markets in Shanghai and Beijing has blown to mega proportions. Some have cashed out, so there are winners and losers. The winners go on a spending spree. Given that they are not accountable to anyone, no one knows what factors or how much the yuan currency supply has expanded. We have witness some ridiculous buying in the last few years. A tourist plunking down 200k Australian in boutique shops. Imagine a reverse, where there are no regulations in Australia. We are all allowed to borrow to mega proportions and go on a spending spree in other countries. We'd be rich too aye? Slam
You're at least half right, they relaxed all the investing rules and reduced interest rates to deliberately pump up the market so they could get a better price for some of the big state owned industries they were privatising. So it was definitely a big conscious play. It's actually turned around 5.5% this morning now as they announced a huge buying program and the big 21 trading firms have promised not to sell any shares until the index gets back to 4500. A lot of the companies have promised to buy back their own shares. This is almost unprecedented, but what the outcome will be of these extreme stabilisation is a big question mark. I would not be surprised to see the market get a bump and then stagnate so long as they pump money in but everyone will be using it to get out at a better price so it can't last forever (they've only promised $120B of funds for the first program). So expect this not to last unless they announce an ongoing MASSIVE buying program. They might have supported the market another 10 or 15% lower but at these prices the market can't find natural stability, it's still over valued, ask they are going to do is hold it up for a few days or a couple weeks at s cost of hundreds of billions.
That's a part of it, but they are mostly high but not very high worth individuals. People worth a few million each. If they lose half their net worth in the market and need money for their business (lots of businesses are going to be in trouble in China), for their kids education or whatever then I think selling the one asset they have that they might make money on is a natural option. Plus, a lot of them are rented and making a lot less than the mortgage so it's actually costing them money at s time when they are going to have cash flow problems. It's really a capital investment but the aren't going to have the patience to stick with it given the limited upside and pressing needs at home. One thing you can garuntee now is much much fewer Chinese buyers for home sales from here on until the foreseeable future. A big drop in those big all cash buyers can't be good for house prices. I prices go down, even a little, people call a top and all the investors are ready to get out and put their money somewhere else it can go to work since it's not going to be doing much there for a while.
Get a grip. They've been there before. In 2007 the same index peaked at 6,000 and then dropped to 2,000 in 2008.
Right, and that was a crippling blow to the country that had local and regional impact lasting years. The difference now is that the makeup up of the buyers of these shares, Chinese individuals and a lot more foreign institutional buyers. It's more concerning for us because western and Australasian investors have more exposure to China and Chinese investors who might pull money out havemore exposure to our markets. Before the buyers were more likely to be local and only invested locally.
The next time the Shanghai has a bad day, I'm buying into an ETF that tracks the Composite NYSE (AHSR) expecting the PBoC to step in and buy directly. Nothing real big, just a taste
Fair points. I'd expect Chinese investment to drop, but by how much could be anyone's guess. Even if this whole China crash didn't happen, I was sensing the RE market was heading for a lull anyway. Yes, it won't take much for a bit of RE panic to set in within the coming months.
Shangai composite now back down to less than 0.5% up despite the big promises, looks like it will end the day in the red which is a very bad psychological signal. They were obviously pretty concerned to sure things up quickly if they announced with all this Greece stuff going on. The news that just just came out that Varoufakis just mysteriously resigned won't help things.
Not looking good! Why ar'nt we hearing about this on MSM news??? http://www.news.com.au/finance/economy/chinese-chaos-worse-than-greece/story-fnu2pycd-1227430761673
That's a MSM news link. But there's more important stuff on at the moment, like The Voice. I aint even joking. Here's the top stories at the moment (this one from google news):
