9 ms·

China Trade Halts Locks Up $2.2 Trillion of Shares, Freezing Market

180 points by sharetea 11y ago

jldugger 11y ago
This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets. That and the high expense ratios.
- Mikeb85 11y ago
  Had you bought a Chinese index share a year ago, you'd still be up around 100%...
  - iofj 11y ago
    Not really. The value of a thing is what someone else is willing (and able) to pay for it. Therefore the value of a Chinese share, at the moment, is $0. In practice it's even negative, as you'll still be paying fees for your brokerage account.
    - deleted 11y ago
      [deleted]
    - Mikeb85 11y ago
      Chinese shares aren't trading at 0. Trading automatically halts after a certain percentage drop on the SSE, it's normal, although not for so many stocks to drop at once. Tomorrow those shares will resume trading, and it won't be at 0. You can see the alternative on the HK market, where some stocks are 15-20% down for the day. You can proclaim the world is ending, I'll be buying at the bottom. While the volatility is a little crazy right now, it's not the end.
      - yequalsx 11y ago
        "...I'll be buying at the bottom." When I went to casinos for fun I never heard anyone admit they lost money gambling. This statement reminds me of gamblers who never admit they lost. You can't predict the bottom. It is highly unlikely that you will actually buy at the bottom. You were speaking hyperbolically I know but the sentiment is a bad one to have when it comes to investing and gambling.
        AustinG08 11y ago
        The stock market is inherently different than going to the casino. Buying at the bottom is hardly a bad sentiment to have when it comes to investing, especially when it comes to making swing trades in thoroughly researched businesses.
        forgetsusername 11y ago
        >Buying at the bottom is hardly a bad sentiment to have when it comes to investing, Buying at the bottom is sheer genius. Being able to actually do it in practice, however, is another story, despite how much you've "researched businesses".
        Mikeb85 11y ago
        No one likes to admit to losing money, you're right. Good poker players still lose hands, and good traders make bad trades. The key though, is when you lose, to cut your losses. When you win, make them count. I certain didn't predict this drop. Then again, I was out of HK last month. I traded in Europe for the last few weeks. I lost money this week, underestimating the effect of Greece. But one thing I do know, is that this drop is a buying opportunity. And you're right, I can't predict the bottom. But I can choose an oversold stock I know will rebound, buy it when it's down to a major support level, and hope for the best. And I've done alright with my strategy. I make a fairly decent return and can sleep at night. And I do like hyperbole :-)
    - solve 11y ago
      If your stock is worth $0, then can I buy it from you for $1? If you hold stock on a stock exchange that closes down every night, is your holding worth $0 overnight while it's untradable? If you invest in a startup where you're not allowed to liquidate for 5 years, and then it eventually sells for millions, was it worth $0 for the entirety of those first 5 years? If your exchange only allows you to trade once every 16th of a second, is your position worth $0 during those 16th of a second gaps?
  - powerapple 11y ago
    I saw one up 13xx% in last 5 years, I would take the risk for that kind of return
  - redwood 11y ago
    But could you sell ?
- dataker 11y ago
  This is a fairly broad and inaccurate statement: emerging markets are way beyond China. If you follow the booming countries until/if they burst you will make more money in that time frame.
- forgetsusername 11y ago
  >This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets. FXI, even after falling off a cliff, is returning 11% YTD, vs 1% YTD for the SPY. It has an expense ratio of 0.74%.
curiousjorge 11y ago
so what's gonna happen tomorrow?
- Mikeb85 11y ago
  Either another drop, or maybe a rebound? My money's on a drop, the SSE is only now crossing the 150 day moving average. But it won't last too much longer. I'd start freeing up some money to buy shares, but be very cautious for the immediate future.
  - curiousjorge 11y ago
    what makes you think it will rebound? btw, god damn, we need a HN for traders.
    - jldugger 11y ago
      You already have Yahoo message boards. And it's crappy, but I suspect it's at least 50 percent not Yahoo's fault.
    - Mikeb85 11y ago
      I don't think it'll rebound tomorrow, but it will eventually (next week?). The fundamentals are all the same, the valuations just got too high. Right now its just panic selling. Most of the stocks I'm following are still higher than I bought them for initially.
      - curiousjorge 11y ago
        what makes you believe this is a panic selling? not trying to put you on the spotlight, genuinely curious to hear all sides
        Mikeb85 11y ago
        Just the fact that nothing has changed fundamentally. The companies are more or less the same as a month ago.
iofj 11y ago
The thing you got to wonder about is : they're trying to stop a panic. Is this going to stop the panic or reinforce it ? My money's on reinforce. And it's (thankfully) out of China.
- curiousjorge 11y ago
  well this is a clear signal that Chinese government has failed to control the stock market. I can't believe how naive they were thinking they could control something that is traditionally found only in non-command economies. My guess is that they are going to come up with some bullshit like foreigners are driving down the stock prices, blame the Western devils for being homeless. Well, it's not like people are going to go up to arms about it, it is a communist country after all, and we've seen how well Soviet Union did in keeping people in check even at the shittiest time.
  - drcross 11y ago
    As if America is doing anything about taking up arms to free themselves from the rape of their country by corporate influences.
  - VintageCool 11y ago
    Foreigners can't invest in China's stock market.
    - irln 11y ago
      Not advocating but I think you can invest in ETFs that track indexes like MCHI and ASHR.
    - Mikeb85 11y ago
      You can since the SH-HK stock connect went live.
    - nogbit 11y ago
      That's true, but, you can bet against it in the NYSE Arca http://www.google.com/finance?q=NYSEARCA%3AYANG http://www.google.com/finance?q=NYSEARCA%3AYANG
gesman 11y ago
>> “The market has failed,” said Hao Hong, a China strategist at Bocom International Holdings Co ... In his view the market would "succeed" if it would always go up? Strategist? Seriously? >> ...failed to revive confidence among stock investors... Depends on which side of trade you are. Investors who are put holders are not complaining ...
- npalli 11y ago
  >In his view the market would "succeed" if it would always go up? Strategist? Seriously? No, I think the Chinese genuinely believed the stock market would channel the excess savings that households have into private and public companies in a controlled manner. There is a genuine mismatch, the households save more than 30% with no place to invest while the corporate sector is burdened with debt thanks to overgenerous lending after the financial crisis. What was supposed to be a gradual 15-20 year stock rise and conversion of debt into equity has become a boom and bust in a year or so. It also looks like a lot of small time investors piled on at the peak and might be looking at large losses. So kind of sucks for the small time Chinese investor who was looking for some growth (since they cannot invest anywhere else - property is already bust)
  - coliveira 11y ago
    > households save more than 30% with no place to invest while the corporate sector is burdened with debt So what the Chinese are proposing is not exactly an investment, it is a transfer of debt from companies to individuals. Anyway, doesn't seem like an idea that would work -- investing in failing companies is a recipe for disaster.
    - visarga 11y ago
      Same thing that happens everywhere: in 2008 in USA, in 2012 in Cypurs and now in Greece.
  - prewett 11y ago
    This sounds like a conspiracy theory to me. The only way you could transfer money from households to corporations via stock would be if the households bought IPO stock. Once a stock is sold through the IPO, it doesn't matter what the price is, the company doesn't get any of that money.
jpmattia 11y ago
I always wondered what evidence there is that a trading freeze would stabilize a market. Considering the US market has trading halts as well, US regulators should take note: Sometimes a stock goes down because it should.
- grandalf 11y ago
  Behavioral economic studies show that humans prefer to avoid loss more than to gain -- So it's possible that markets rationally cut losses more than they rationally add capital to undervalued stocks. Regardless, all the "freeze" does is make the published "price" no longer reflect the market price.
- coliveira 11y ago
  I think it is OK to have trading halts for particular situations. For example, a stock may be going down quickly just because of a wild rumor. Halting trade for the day may give time to investors, so they can consider what the facts are before taking a more informed decision. On the other hand, I agree with you that trade freezes are not enough to fix true underlying issues -- as it seems to be the case with China.
  - jpmattia 11y ago
    > I think it is OK to have trading halts for particular situations. Sure, but that's not what I'm referring to: Anytime a stock drop by a given percentage, it is halted. Also, if the market drops by a percentage, the entire market is halted. If those happen to be part of a larger coupled drop, then the US market would have the same problems opening that the Chinese market is having: Everyone waits for the open, tries sell all at once, re-invokes the halt, and repeat.
  - hueving 11y ago
    Even a wild rumor is a stupid reason to halt trading. If someone is dumb enough to believe it and they sell their shares at a massive discount, it's not the job of regulators to stop that.
    - 11y ago
MarkMc 11y ago
For a taste of what Chinese investors are going through I highly recommend Galbraith's "The Great Crash 1929" [1]. He gives fascinating insights into to the mania and crash of the market and the futility of the authorities to prop it up. Here's an excerpt: The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable. The rumors in China about malevolent foreign influence on the market also echo the 1929 crash. Galbraith again: What was perhaps the last word on the policy of reassurance was said by Simeon D. Fess, the Chairman of the Republican National Committee: "Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops." [1] http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/0547248164 http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/...
- kvcc01 11y ago
  It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.
  - backtoyoujim 11y ago
Magicstatic 11y ago
Serious question: How difficult is it to short the entire Shanghai Composite Index? Would it even be possible to place a trade?
- deleted 11y ago
  [deleted]
- bedhead 11y ago
  ASHR is the etf with the most liquidity.
  - Magicstatic 11y ago
    Thank you for bringing this to my attention... second question: Why isn't everyone and their sister shorting the Asian market right now? Or are they?
    - bedhead 11y ago
      Very, very low liquidity for foreigners. I don't even know what the rules are for nationals. Maybe some hedge funds are doing some otc stuff but otherwise there just aren't any serious options.
    - singlefo 11y ago
      CHAD is a 1x inverse ETF that tracks the CSI 300 and has performed as expected in this environment. Note, if more and more people pile in to take advantage of the situation, it will almost certainly trade at a premium to NAV. This should not happen in an ETF to due the creation/redemption mechanism of ETFs, but the issuer is limiting creation units so it could trade like a closed end fund.
    - forgetsusername 11y ago
      >Why isn't everyone and their sister shorting the Asian market right now? Because every seller requires a buyer.
- PublicEnemy111 11y ago
rrggrr 11y ago
This is a deflationary spiral playing out in a predictable manner. First commodities declined, hard. Balance sheets and earnings fell. Real estate falling. Equities now rocked, the effect amplified by fear and increasing uncertainty. There is about 2 trillion of US dollar reserves on China's balance sheet, and I am guessing that number will decline by half in the months, possibly years to come.
- shostack 11y ago
  What would you expect to occur in terms of impact to the US and rest of the world?
  - rrggrr 11y ago
    China probably will liquidate treasury holdings to fund their margin bank and other stimulus, and they will do it at a loss because global uncertainty is forcing yields down. Put simply, a lot of USD sequestered on China's balance sheet will find its way back into global commerce. Thankfully.
duncan_bayne 11y ago
http://www.quickmeme.com/img/3b/3bcf43f1e32c11142f206cc2501fb2a809a043f1c67fdb942f4965f077570dbe.jpg http://www.quickmeme.com/img/3b/3bcf43f1e32c11142f206cc2501f...
JimmyM 11y ago
Given that Chinese investors have been buying significant amounts of real estate abroad (http://uk.reuters.com/article/2014/07/30/uk-china-property-overseas-investment-idUKKBN0FZ0HY20140730 http://uk.reuters.com/article/2014/07/30/uk-china-property-o...), does anyone have any idea what this will mean for housing in other countries? Higher house prices? (Chinese bears fleeing to overseas property like American bears flee to gold) Lower house prices? (Chinese investors attempting to recoup their losses/keep enough cash on hand to pay their debts and other obligations) Neither/something else? (perhaps Chinese real estate investment has a negligible effect on house prices) This is a significant question for me because house prices in the UK are far too high for my partner and I to have much chance of ever buying a property, at present, even with a very healthy deposit.
- devloper 11y ago
  "...house prices in the UK are far too high..." What do you mean, the prices keep falling? Unless you have meant London rather than UK.
- wora 11y ago
  The buying power of Chinese consumers already pushed up price for many things, from commodity to luxury goods to real estates. It is unavoidable nature of society growth. This has very little to do with Chinese investors. Very few people got rich through stock market in China (probably the same everywhere).
- evgen 11y ago
  Chinese buyers have a much bigger impact on the western coasts of the US and Canada (Vancouver specifically) than they do in the UK. Foreign buyers in the UK are mostly European or from the Middle East and conditions in both places are probably making people favor parking capital in the UK. If you are Chinese and able to get your money out of the country and into foreign property you would probably hold on to that property for as long as you possibly can; by being outside of China it is worth far more than anything you might use to cover domestic debt.
- Tiktaalik 11y ago
  We'll get to find out if these houses have been bought using laundered cash or if the owners are using financing dependent on foreign income. If these houses are largely investment properties purchased to hedge against the home market, then it's more likely the former. I expect we will see higher housing prices as the rich try harder to move more of their money out of China.
tiatia 11y ago
The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental." Ouch. Stock prices follow fundamentals, if at all, only in the longest terms.

180 points by sharetea 11y ago

This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets. That and the high expense ratios.

Mikeb85 11y ago
Had you bought a Chinese index share a year ago, you'd still be up around 100%...
- iofj 11y ago
  Not really. The value of a thing is what someone else is willing (and able) to pay for it. Therefore the value of a Chinese share, at the moment, is $0. In practice it's even negative, as you'll still be paying fees for your brokerage account.
  - deleted 11y ago
    [deleted]
  - Mikeb85 11y ago
    Chinese shares aren't trading at 0. Trading automatically halts after a certain percentage drop on the SSE, it's normal, although not for so many stocks to drop at once. Tomorrow those shares will resume trading, and it won't be at 0. You can see the alternative on the HK market, where some stocks are 15-20% down for the day. You can proclaim the world is ending, I'll be buying at the bottom. While the volatility is a little crazy right now, it's not the end.
    - yequalsx 11y ago
      "...I'll be buying at the bottom." When I went to casinos for fun I never heard anyone admit they lost money gambling. This statement reminds me of gamblers who never admit they lost. You can't predict the bottom. It is highly unlikely that you will actually buy at the bottom. You were speaking hyperbolically I know but the sentiment is a bad one to have when it comes to investing and gambling.
      - AustinG08 11y ago
        The stock market is inherently different than going to the casino. Buying at the bottom is hardly a bad sentiment to have when it comes to investing, especially when it comes to making swing trades in thoroughly researched businesses.
        forgetsusername 11y ago
        >Buying at the bottom is hardly a bad sentiment to have when it comes to investing, Buying at the bottom is sheer genius. Being able to actually do it in practice, however, is another story, despite how much you've "researched businesses".
      - Mikeb85 11y ago
        No one likes to admit to losing money, you're right. Good poker players still lose hands, and good traders make bad trades. The key though, is when you lose, to cut your losses. When you win, make them count. I certain didn't predict this drop. Then again, I was out of HK last month. I traded in Europe for the last few weeks. I lost money this week, underestimating the effect of Greece. But one thing I do know, is that this drop is a buying opportunity. And you're right, I can't predict the bottom. But I can choose an oversold stock I know will rebound, buy it when it's down to a major support level, and hope for the best. And I've done alright with my strategy. I make a fairly decent return and can sleep at night. And I do like hyperbole :-)
  - solve 11y ago
    If your stock is worth $0, then can I buy it from you for $1? If you hold stock on a stock exchange that closes down every night, is your holding worth $0 overnight while it's untradable? If you invest in a startup where you're not allowed to liquidate for 5 years, and then it eventually sells for millions, was it worth $0 for the entirety of those first 5 years? If your exchange only allows you to trade once every 16th of a second, is your position worth $0 during those 16th of a second gaps?
- powerapple 11y ago
  I saw one up 13xx% in last 5 years, I would take the risk for that kind of return
- redwood 11y ago
  But could you sell ?
dataker 11y ago
This is a fairly broad and inaccurate statement: emerging markets are way beyond China. If you follow the booming countries until/if they burst you will make more money in that time frame.
forgetsusername 11y ago
>This is the sort of reason why I ignore the advice to put some trifling portion of my portfolio in emerging markets. FXI, even after falling off a cliff, is returning 11% YTD, vs 1% YTD for the SPY. It has an expense ratio of 0.74%.

curiousjorge 11y ago

so what's gonna happen tomorrow?

Mikeb85 11y ago
Either another drop, or maybe a rebound? My money's on a drop, the SSE is only now crossing the 150 day moving average. But it won't last too much longer. I'd start freeing up some money to buy shares, but be very cautious for the immediate future.
- curiousjorge 11y ago
  what makes you think it will rebound? btw, god damn, we need a HN for traders.
  - jldugger 11y ago
    You already have Yahoo message boards. And it's crappy, but I suspect it's at least 50 percent not Yahoo's fault.
  - Mikeb85 11y ago
    I don't think it'll rebound tomorrow, but it will eventually (next week?). The fundamentals are all the same, the valuations just got too high. Right now its just panic selling. Most of the stocks I'm following are still higher than I bought them for initially.
    - curiousjorge 11y ago
      what makes you believe this is a panic selling? not trying to put you on the spotlight, genuinely curious to hear all sides
      - Mikeb85 11y ago
        Just the fact that nothing has changed fundamentally. The companies are more or less the same as a month ago.

iofj 11y ago

The thing you got to wonder about is : they're trying to stop a panic. Is this going to stop the panic or reinforce it ? My money's on reinforce. And it's (thankfully) out of China.

curiousjorge 11y ago
well this is a clear signal that Chinese government has failed to control the stock market. I can't believe how naive they were thinking they could control something that is traditionally found only in non-command economies. My guess is that they are going to come up with some bullshit like foreigners are driving down the stock prices, blame the Western devils for being homeless. Well, it's not like people are going to go up to arms about it, it is a communist country after all, and we've seen how well Soviet Union did in keeping people in check even at the shittiest time.
- drcross 11y ago
  As if America is doing anything about taking up arms to free themselves from the rape of their country by corporate influences.
- VintageCool 11y ago
  Foreigners can't invest in China's stock market.
  - irln 11y ago
    Not advocating but I think you can invest in ETFs that track indexes like MCHI and ASHR.
  - Mikeb85 11y ago
    You can since the SH-HK stock connect went live.
  - nogbit 11y ago
    That's true, but, you can bet against it in the NYSE Arca http://www.google.com/finance?q=NYSEARCA%3AYANG http://www.google.com/finance?q=NYSEARCA%3AYANG

gesman 11y ago

>> “The market has failed,” said Hao Hong, a China strategist at Bocom International Holdings Co ... In his view the market would "succeed" if it would always go up? Strategist? Seriously? >> ...failed to revive confidence among stock investors... Depends on which side of trade you are. Investors who are put holders are not complaining ...

npalli 11y ago
>In his view the market would "succeed" if it would always go up? Strategist? Seriously? No, I think the Chinese genuinely believed the stock market would channel the excess savings that households have into private and public companies in a controlled manner. There is a genuine mismatch, the households save more than 30% with no place to invest while the corporate sector is burdened with debt thanks to overgenerous lending after the financial crisis. What was supposed to be a gradual 15-20 year stock rise and conversion of debt into equity has become a boom and bust in a year or so. It also looks like a lot of small time investors piled on at the peak and might be looking at large losses. So kind of sucks for the small time Chinese investor who was looking for some growth (since they cannot invest anywhere else - property is already bust)
- coliveira 11y ago
  > households save more than 30% with no place to invest while the corporate sector is burdened with debt So what the Chinese are proposing is not exactly an investment, it is a transfer of debt from companies to individuals. Anyway, doesn't seem like an idea that would work -- investing in failing companies is a recipe for disaster.
  - visarga 11y ago
    Same thing that happens everywhere: in 2008 in USA, in 2012 in Cypurs and now in Greece.
- prewett 11y ago
  This sounds like a conspiracy theory to me. The only way you could transfer money from households to corporations via stock would be if the households bought IPO stock. Once a stock is sold through the IPO, it doesn't matter what the price is, the company doesn't get any of that money.

jpmattia 11y ago

I always wondered what evidence there is that a trading freeze would stabilize a market. Considering the US market has trading halts as well, US regulators should take note: Sometimes a stock goes down because it should.

grandalf 11y ago
Behavioral economic studies show that humans prefer to avoid loss more than to gain -- So it's possible that markets rationally cut losses more than they rationally add capital to undervalued stocks. Regardless, all the "freeze" does is make the published "price" no longer reflect the market price.
coliveira 11y ago
I think it is OK to have trading halts for particular situations. For example, a stock may be going down quickly just because of a wild rumor. Halting trade for the day may give time to investors, so they can consider what the facts are before taking a more informed decision. On the other hand, I agree with you that trade freezes are not enough to fix true underlying issues -- as it seems to be the case with China.
- jpmattia 11y ago
  > I think it is OK to have trading halts for particular situations. Sure, but that's not what I'm referring to: Anytime a stock drop by a given percentage, it is halted. Also, if the market drops by a percentage, the entire market is halted. If those happen to be part of a larger coupled drop, then the US market would have the same problems opening that the Chinese market is having: Everyone waits for the open, tries sell all at once, re-invokes the halt, and repeat.
- hueving 11y ago
  Even a wild rumor is a stupid reason to halt trading. If someone is dumb enough to believe it and they sell their shares at a massive discount, it's not the job of regulators to stop that.
  - 11y ago

MarkMc 11y ago

For a taste of what Chinese investors are going through I highly recommend Galbraith's "The Great Crash 1929" [1]. He gives fascinating insights into to the mania and crash of the market and the futility of the authorities to prop it up. Here's an excerpt: The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable. The rumors in China about malevolent foreign influence on the market also echo the 1929 crash. Galbraith again: What was perhaps the last word on the policy of reassurance was said by Simeon D. Fess, the Chairman of the Republican National Committee: "Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops." [1] http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/0547248164 http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/...

kvcc01 11y ago
It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.
- backtoyoujim 11y ago

Magicstatic 11y ago

Serious question: How difficult is it to short the entire Shanghai Composite Index? Would it even be possible to place a trade?

deleted 11y ago
[deleted]
bedhead 11y ago
ASHR is the etf with the most liquidity.
- Magicstatic 11y ago
  Thank you for bringing this to my attention... second question: Why isn't everyone and their sister shorting the Asian market right now? Or are they?
  - bedhead 11y ago
    Very, very low liquidity for foreigners. I don't even know what the rules are for nationals. Maybe some hedge funds are doing some otc stuff but otherwise there just aren't any serious options.
  - singlefo 11y ago
    CHAD is a 1x inverse ETF that tracks the CSI 300 and has performed as expected in this environment. Note, if more and more people pile in to take advantage of the situation, it will almost certainly trade at a premium to NAV. This should not happen in an ETF to due the creation/redemption mechanism of ETFs, but the issuer is limiting creation units so it could trade like a closed end fund.
  - forgetsusername 11y ago
    >Why isn't everyone and their sister shorting the Asian market right now? Because every seller requires a buyer.
PublicEnemy111 11y ago

rrggrr 11y ago

This is a deflationary spiral playing out in a predictable manner. First commodities declined, hard. Balance sheets and earnings fell. Real estate falling. Equities now rocked, the effect amplified by fear and increasing uncertainty. There is about 2 trillion of US dollar reserves on China's balance sheet, and I am guessing that number will decline by half in the months, possibly years to come.

shostack 11y ago
What would you expect to occur in terms of impact to the US and rest of the world?
- rrggrr 11y ago
  China probably will liquidate treasury holdings to fund their margin bank and other stimulus, and they will do it at a loss because global uncertainty is forcing yields down. Put simply, a lot of USD sequestered on China's balance sheet will find its way back into global commerce. Thankfully.

duncan_bayne 11y ago

http://www.quickmeme.com/img/3b/3bcf43f1e32c11142f206cc2501fb2a809a043f1c67fdb942f4965f077570dbe.jpg http://www.quickmeme.com/img/3b/3bcf43f1e32c11142f206cc2501f...

JimmyM 11y ago

Given that Chinese investors have been buying significant amounts of real estate abroad (http://uk.reuters.com/article/2014/07/30/uk-china-property-overseas-investment-idUKKBN0FZ0HY20140730 http://uk.reuters.com/article/2014/07/30/uk-china-property-o...), does anyone have any idea what this will mean for housing in other countries? Higher house prices? (Chinese bears fleeing to overseas property like American bears flee to gold) Lower house prices? (Chinese investors attempting to recoup their losses/keep enough cash on hand to pay their debts and other obligations) Neither/something else? (perhaps Chinese real estate investment has a negligible effect on house prices) This is a significant question for me because house prices in the UK are far too high for my partner and I to have much chance of ever buying a property, at present, even with a very healthy deposit.

devloper 11y ago
"...house prices in the UK are far too high..." What do you mean, the prices keep falling? Unless you have meant London rather than UK.
wora 11y ago
The buying power of Chinese consumers already pushed up price for many things, from commodity to luxury goods to real estates. It is unavoidable nature of society growth. This has very little to do with Chinese investors. Very few people got rich through stock market in China (probably the same everywhere).
evgen 11y ago
Chinese buyers have a much bigger impact on the western coasts of the US and Canada (Vancouver specifically) than they do in the UK. Foreign buyers in the UK are mostly European or from the Middle East and conditions in both places are probably making people favor parking capital in the UK. If you are Chinese and able to get your money out of the country and into foreign property you would probably hold on to that property for as long as you possibly can; by being outside of China it is worth far more than anything you might use to cover domestic debt.
Tiktaalik 11y ago
We'll get to find out if these houses have been bought using laundered cash or if the owners are using financing dependent on foreign income. If these houses are largely investment properties purchased to hedge against the home market, then it's more likely the former. I expect we will see higher housing prices as the rich try harder to move more of their money out of China.

tiatia 11y ago

The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental." Ouch. Stock prices follow fundamentals, if at all, only in the longest terms.