China stocks slide 5.3 pct to new 20-month low (62% down from the peak)

Reuters ^ | 08/19/08 | Claire Zhang

[TigerLikesRooster]

China stocks slide 5.3 pct to new 20-month low

Reuters - Tuesday, August 19

* Strong South Locomotive debut not positive sign for market

* Over 200 Shanghai stocks plunge 10 percent limit

* Regulator's pledge of support fails to reassure investors

By Claire Zhang

SHANGHAI, Aug 18 - China's main stock index tumbled more than 5 percent on Monday to a new 20-month closing low, hit by fears that slowing economic growth will stifle the expansion of corporate profits.

The Shanghai Composite Index ended down 5.34 percent at 2,319.868 points, only marginally off its intra-day low of 2,318.926. It is down 14.95 percent over the past seven trading days, and down 62 percent from last October's record peak.

Falling stocks in Shanghai outnumbered gainers by 904 to 31, with over 200 Shanghai A shares plunging their 10 percent daily limits.

"There is no confidence at all, and no money entering the market to clean up this mess, so no one can call a floor now," said Zhang Qi, analyst at Haitong Securities.

Turnover in Shanghai A shares was small at 35.7 billion yuan , with over 6 billion yuan of that amount contributed by newly listing China South Locomotive & Rolling Stock Corp, against Friday's 27.1 billion yuan.

Coal shares sagged after China late on Friday said it was raising export taxes on coke, coking coal and thermal coal to address a coal shortage. Shenhua Energy, China's biggest coal producer, sank 5.20 percent to 26.79 yuan.

[TigerLikesRooster]

Ping!

[montag813]

Enjoy our low interest rates while they last.

[Proud_USA_Republican]

A lot of China’s growth the past years was heavily based on manipulating its currency with an artificial fixed peg to the US dollar. They believed they would be able to orchestrate a never ending and increasing trade balance with Europe and the US, but it was juiced by artificial methods that cannot be sustained longterm.
Only problem was a little word called inflation.

[ApplegateRanch]

Coal shares sagged after China late on Friday said it was raising export taxes on coke, coking coal and thermal coal to address a coal shortage. Shenhua Energy, China's biggest coal producer, sank 5.20 percent to 26.79 yuan.

If China didn't keep blowing up, caving in, or setting on fire its mines, and killing its miners, they might not have a coal shortage.

Maybe Nancy will give them some relief by letting them dig the coal she won't let Americans dig.

[Steely Tom]

Might be related to the drop in petroleum price.

[McCloud-Strife]

I wonder if it has anything to do with how the Olympics were fake, tawdry, and without substance. I wonder if it has shown the world what their money has been buying. A fake country, with fake products, real oppression and real tears

[LS]

And so begins the massive "retrenchment" of China that swept Japan (who was going to "overtake" us) in the 1990s.

People need to figure out that the U.S. economy GROWS at the rate of INDIA every year!! Low-cost labor only gets you so far, as the Chinese have now found because they have to export manufacturing "off shore" to Vietnam. Sooner or later, you have to invent and create wealth.

[TigerLikesRooster]

They are at the tail end of cheap labor economy. Profit margin is razor thin. Inflation(around 10%) eating up all growth rate(around 10%.) Massive corruption and pent-up resentment by ordinary people.

This is usually when social unrests break out.

[snarks_when_bored]

The Shanghai Composite Index ended down 5.34 percent at 2,319.868 points, only marginally off its intra-day low of 2,318.926. It is down 14.95 percent over the past seven trading days, and down 62 percent from last October's record peak.

Hmmm, a completed 61.8% Fibonacci retracement? There may be a bit of overshoot, but a bounce up is probably in the offing. If so, I hope that bouncing cat ain't dead...

[LS]

Yeah. Interesting that Freedman's book, "The World Is Flat," had a story about a Chinese sock manufacturer who made socks for 11 cents per pair and had to move his facilities for cheaper labor.

The dirty little secret, though, is that the U.S. has always been built on high-end labor, due to the availability of land, and that we have never competed with low-wage labor. In the 1800s, Britain battled us with low-wage labor and eventually lost. So did the Japanese in the 1990s. That's why schemes to "bolster" the rust-belt, manufacturing economies are just silly. The only way we win is to stay ahead of the technology---computers, bio-med, glass, high-tech everything.

[sitetest]

China stocks slide 5.3 pct to new 20-month low (62% down from the peak)

Wow. Now THAT’S a bear market.

[ponder life]

A lot of China’s growth the past years was heavily based on manipulating its currency with an artificial fixed peg to the US dollar. They believed they would be able to orchestrate a never ending and increasing trade balance with Europe and the US, but it was juiced by artificial methods that cannot be sustained longterm.

They may have believed it at one time, but they no longer believe it. That's why they are allowing labor intensive manufacturing to close down by the thousands. And contrary to popular believe, they have given in to the West's demand to allow the currency to appreciate (albeit slowly). And any kind tax incentive for the low cost manufacturers are a thing of the past. China is now going to focus on technology drive industries.

You may believe the article above signifies the end of the economic run for China. And for a year or two you maybe right as adjustments can many times show itself as a recession. But I believe China will adapt....and China will become more competitive and slowly resemble a developed nation......except on a much larger scale.

[MimirsWell]

Dear Chicom,

Time will tell whether your ‘dream’ will come true.

[ponder life]

Time will tell whether your ‘dream’ will come true.

There's no gurantee either way. But I believe China will adapt. Years ago, on the FR, when everyone was complaining about manufacturing moving into China, I had said there will be time when they will close labor intensive industries. It had happened in Japan, Singapore, Korea, Taiwan, Hong Kong, etc. And now, it is China's time to close them down.

In contrast, you don't see much in the news about the higher value industries expanding and moving into China (i.e., GM, GE, Boeing, Microsoft, etc.). But it is happening.

Some of the labor intensive factories may even move back to the US. Germany has brought some of them back.

Typically, there is a lull in the economy where closing of labor intensive factories can occur faster than opening high tech facilities. Exports from the US climbed faster than from China this last year. This, of course, is temporary. Over the next 10 years, China will move further ahead as higher value products are exported (e.g., autos).

As a last comment, there isn't anything wrong with China dreaming of a better life. But there will always be those like you who will wish them to stumble. The 'dream' will always be seen as something negative by people like you.