Chinese Stocks Come Totally Unglued

[marmar]

Chinese Stocks Come Totally Unglued
by Wolf Richter • July 7, 2015


The Shanghai Stock Exchange closed down 1.3% on Tuesday, which seemed benign after its three-week, near-30% crash that saw $3.2 trillion go up in smoke. It calmed the nerves in the West; a further collapse has been averted by astute government and central bank action.

But the index was down only 1.3% because government entities, government controlled institutions, mutual funds, 21 of the largest brokerages, pension funds, the largest companies themselves, and whoever else has to follow government wishes had been buying shares of the largest companies, such as state-controlled oil companies and banks. Buying kicked in seriously toward the end of the trading day after the index had been down 4.3% earlier. With their large weight in the index, these gainers propped up the overall index. But beneath the surface, it was brutal.

The Shenzhen Stock Exchange index, where smaller and medium-size companies are traded, plunged 5.3%; the ChiNext index, where tech companies and small caps are concentrated, plummeted 5.7%.

Countless stocks hit their 10% down limit for the day. George Chen, Managing Editor at the South China Morning Post’s International Edition, reported that trading in 942 stocks, one-third of the A-share listed companies on the Shanghai and Shenzhen Stock Exchanges, had been suspended by the end of the day to shield these shares from further collapse. ..............(more)

http://wolfstreet.com/2015/07/07/china-stocks-come-totally-unglued-beneath-surface/

[leveymg]

1. Not mentioned here: Chinese Gov't ordered large traders to stop selling shares.

Effectively, there is no more Chinese stock market as of today.

China Bans Stock Sales by Major Shareholders for Six Months
Source: Bloomberg

by Ye XieBelinda Cao
July 8, 2015 — 8:10 AM EDT
Updated on July 8, 2015 — 9:19 AM EDT

China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.

Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.

While China has already ordered government-owned institutions to maintain or boost their stock holdings, the CSRC’s directive expands the ban on sales to non-state companies and potentially foreign investors who own major stakes in mainland businesses. Regulators have unveiled market-boosting measures almost every night over the past 10 days, steps that have so far failed to revive investor confidence. Foreign traders sold Chinese shares at a record pace this week in part due concerns over the government’s meddling in markets.

“This is not something that would happen in the U.S. or in any other developed market,” said Brian Jacobsen, who helps oversee $250 billion as the chief portfolio strategist at Wells Fargo Funds Management. “It does smell a little bit of desperation. But in China it’s a very unique system and they are taking unique steps to try to stop the drop.”

Read more: http://www.bloomberg.com/news/articles/2015-07-08/china-bans-stock-sales-by-major-shareholders-for-six-months

[PeoViejo]

2. The Chinese love to gamble.

It's nearly an obsession in their Society. This was a situation that was ordained from the beginning.

[99th_Monkey]

3. How can this NOT be related to NYSE's "technical glitch"? Talk me down plz -nt-

[LanternWaste]

4. What would be the precise and relevant effect of one to the other?

What would be the precise and relevant effect of one to the other?

[99th_Monkey]

5. Timing, and timing

did I say timing?

Just hard to believe them happening concurrently is totally a coincidence, that's all.

If I were a financial wizard, I'd be happy to answer your question.