Chinese Stock Market Collapse - Prediction

[ScarFace]

China warns banks over asset bubbles
By Jamil Anderlini in Beijing
Published: July 27 2009 12:45 | Last updated: July 27 2009 12:45

Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channelled into the real economy and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming.

The new policy requires banks to monitor how their loans are spent and comes amid warnings that banks ignored basic lending standards in the first half of this year as they rushed to extend Rmb7,370bn in new loans, more than twice the amount lent in the same period a year earlier.

 

[TeeKee]

Financial Tsunami Part Deux?

 

[dysentry]

I really beg to differ, a sharp correction of 5 to 7.7% doesn't equates to a "Collapse" for a market that rose 81% this year (data taken from your post).

Previous so-called collapse are easily more than 20% in 1 single day.

Nowadays stock exchanges apply circuit breakers which automatically trigger in a crash; thus freefalls like the past will hardly be seen.

I think there is a higher top to come in Aug or early Sep, but I'm already out of the market, waiting for the next train.

 

[ScarFace]

Chinese bubble fears as funds flow into IPOs
By Richard McGregor in Beijing and Xi Chen in Hong Kong
Published: July 29 2009 19:36 | Last updated: July 29 2009 19:36

Shares in Shanghai and Hong Kong tumbled on Wednesday as investors snapped up two newly listed mainland construction groups while selling down the rest of the market after reports that China’s central bank might rein in bank lending.

Shares in China State Construction Engineering rose by as much as 90 per cent on their debut before closing 56 per cent stronger in Shanghai. China’s largest housebuilder had last week raised Rmb50.2bn ($7.34bn) in the world’s biggest initial public offering since Visa raised $19bn in March 2008.

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The surge of funds into the market has reignited fears of a new bubble forming in both the property and share markets. The Shanghai Composite index has doubled since it hit bottom late last year, beating all comparable indices around the world.

On Wednesday, the Shanghai index sank 5 per cent to 3,266.43, after falling as much as 7.7 per cent in the day. In Hong Kong, the Hang Seng index ended down 2.4 per cent at 20,135.

The collapse of the previous bubble in Shanghai stocks, in October 2007, helped to trigger the global financial crisis. However, international reaction was muted on Wednesday, with European and US equity futures dipping only briefly in response to the Asian news.

Investors cited CSCE’s exposure to China’s construction and infrastructure boom in their rush to buy shares.

Domestic IPOs were suspended for nine months until this month at a time when large investors in particular were flush with funds accessed through the government’s economic stimulus package.

The appetite for new shares is overwhelming, with a record number of 566,937 new trading accounts opened last week, the most since January 2008.

Shares in Sichuan Expressway, the first large IPO in Shanghai this year, tripled on debut before closing 203 per cent up on Monday, the first day of trading. The shares have fallen every day since by the maximum daily limit of 10 per cent.

The market frenzy has spilled into neighbouring Hong Kong, where on Wednesday, BBMG, a _Chinese construction material maker, saw its shares rise nearly 60 per cent in the first hour of trading.

Copyright The Financial Times Limited 2009

 

[ScarFace]

Short View: Shanghai surprise
By John Authers, Investment editor
Published: July 29 2009 18:33 | Last updated: July 29 2009 18:33

The world had an echo on Wednesday of the “Shanghai surprise” that sparked the first panic of the credit crisis.

On February 26 2007, the Shanghai composite index, which had rallied for months, suddenly fell 268 points, or 8.8 per cent. A global sell-off ensued. As it turned out, the first Shanghai bubble kept inflating for six more months before popping in October 2007.

On Wednesday, the Shanghai suddenly fell 265 points, or 7.6 per cent, at the worst point.

This year, the rally has again been impressive, with the Shanghai up 108 per cent from its autumn crisis low. As in the previous bubble, this rally has owed everything to valuation. At the outset in October, the Shanghai traded at 1.9 times its book value (the value of assets minus liabilities on its companies’ balance sheets). By Tuesday, this had doubled to 3.78 times book value. The premium China commands over the rest of the world has risen even faster than in the previous bubble.

So what led to the selling? A benign explanation – which the muted global response suggests traders believe for now – is that the market was overextended and due for a correction. The debut of a large initial public offering was an obvious catalyst. With $7.9bn of issuance so far this quarter, this is already the busiest quarter for IPO issuance since the bubble peaked, according to Dealogic.

More concerning, there were press reports that the biggest Chinese banks were about to shut down lending for the year. As loans by Chinese financial institutions are up a stunning 34.4 per cent over the past year, overheating must be a concern.

The word “bubble” can be overused. If this is another share bubble, it is not yet as big as the one that preceded it.

But the two have enough in common to warrant extremely close attention.

 

[dysentry]

China down 2.1% and India down 2.5%.

This is interesting, we could be seeing a paradigm shift with Asian stocks leading price trends instead of SPX.

Bear rally or Bull correction is anyone's guess.

 

[ScarFace]

China Stocks Slump; Shanghai Composite Index Enters Correction
By Bloomberg News

Aug. 12 (Bloomberg) -- China’s stocks tumbled, with the Shanghai Composite Index entering a so-called correction, on concern a slump in exports and new loans will undermine the country’s economic recovery.

The benchmark index fell 4.7 percent to a four-week low as the commerce ministry said China’s $4 trillion yuan ($585 billion) stimulus package can’t completely offset falling export demand. The gauge has lost 10 percent since reaching a 15-month high on Aug. 4 as banks reined in lending to avert asset bubbles.

“Investors have realized the recovery of the economy isn’t as solid as they had expected,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “Inflows into equities will slow down for the rest of the year as new lending growth eases.”

...The Shanghai Composite sank 152.01 to 3,112.72, its lowest close since July 13. The gauge has gained 71 percent this year as regulators loosened lending restrictions and the government implemented a stimulus package to revive the economy. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, retreated 4.5 percent to 3,397.4.

Domestic demand is unlikely “to provide a full remedy for the sharp contraction in external demand,” the commerce ministry said in a statement today. Exports fell 23 percent from a year earlier, the government said yesterday, while urban fixed-asset investment rose a less-than-estimated 32.9 percent in the first seven months from a year earlier.

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