Chinese chaos worse than Greece

News.com.au ^ | July 7, 3015 | FRANK CHUNG and AFP

[Perseverando]

WHILE the world worries about Greece, there’s an even bigger problem closer to home: China.

A stock market crash there has seen $3.2 trillion wiped from the value of Chinese shares in just three weeks, triggering an emergency response from the government and warnings of “monstrous” public disorder.

• LATEST: CHINESE INVESTORS FLEE FOR SAFETY

And the effects for Australia could be serious, affecting our key commodity exports and sparking the beginning of a period of recession-like conditions.

“State-owned newspapers have used their strongest language yet, telling people ‘not to lose their minds’ and ‘not to bury themselves in horror and anxiety’. [Our] positive measures will take time to produce results,” writes IG Markets.

“If China does not find support today, the disorder could be monstrous.”

In an extraordinary move, the People’s Bank of China has begun lending money to investors to buy shares in the flailing market. The Wall Street Journal reports this “liquidity assistance” will be provided to the regulator-owned China Securities Finance Corp, which will lend the money to brokerages, which will in turn lend to investors.

The dramatic intervention marks the first time funds from the central bank have been directed anywhere other than the banks, signalling serious concern from authorities about the crisis.

At the same time, Chinese authorities are putting a halt to any new stock listings. The market regulator announced on Friday it would limit initial public offerings — which disrupt the rest of the market — in an attempt to curb plunging share prices.

While the exact amount of assistance hasn’t been revealed, the WSJ reports no upper limit has been set.

All short-selling — the practice of betting that stocks will fall — has been banned, and Chinese media has rushed to reassure citizens.

Yesterday, shares in big state companies soared

[Repeal The 17th]

[woodbutcher1963]

The Shanghai Composite is went up 100% since last November(2500 to 5000). It was up 80% year to date until about the beginning of June. It has dropped 47% from its high. However, that means it is still UP for the year.

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{”allowChartStacking”:true}

Check out the 1 year chart and 5 year chart. It was on a fairly even climb until last fall and then exploded to the up side. It is giving most of that back. So far it is still above the long term chart trend line.

[woodbutcher1963]

If you extend that chart out to ten years you will see the spike in 2006 to 5900 and fall in 2007 all the way 1728. So, IMHO this current correction could only be about half done.

[Ahithophel]

[$3.2 trillion wiped from the value of Chinese shares in just three weeks]

Wow. 1/3 of the first part of U.S. debt in only 3 weeks. Wow.

Bush's fault, obviously.

[JimRed]

Information coming out of China is more tightly controlled than from Greece, so most of us are unaware of their problems.

[SaveFerris]

Oh yes. No doubt Sarah Palin was involved, too.

[1rudeboy]

Can’t “call” a T-bond.

[Organic Panic]

China has begun lending money to investors to buy shares in the flailing market.

Because that has a great track record of saving markets...