
Chinese stock plunge leaves investors scouring state media for clues - adventured
http://www.bloomberg.com/news/articles/2015-06-26/the-loudest-voice-in-china-s-stock-market-is-changing-its-tune
======
EliRivers
From the article, a small investor: _" China’s stock market is really
different from other countries"_

It's different this time. I'm sure I've heard that before.

Anyway, something tangential but a little bit interesting; it seems that an
accountant quoted in this story, "Yao Lina", sold all her holding in February
2012:
[http://s-aint.com/store/files/Bloomberg_Business_News_Headli...](http://s-aint.com/store/files/Bloomberg_Business_News_Headlines_15.08.2012.pdf)

And also in November 2013:
[http://www.bloomberg.com/news/articles/2014-01-21/china-
ipos...](http://www.bloomberg.com/news/articles/2014-01-21/china-ipos-no-lure-
as-investors-empty-trading-accounts)

And June 2015 in this article.

All Bloomberg origin, as far as I can tell.

Sure, maybe she really does binge on cycles of all in and all out, but it
seems odd nonetheless. If I had to guess, if she does exist, she's a reliable
source for journos who need an "ordinary chinese citizen" to tell them she's
bailed out completely, and give them a good quote, always on the same theme:

 _“I have no confidence in the stock market,”_

 _“I thought the market was going nuts and someone was coming to manipulate
the market... I have no confidence in the market because there are lots of
speculators playing in it.”_

 _...the government may take as long as five years to fix “structural”
challenges in the economy that have curbed growth._

This most recent article contains an odd change of tone, though. She's still
bailed out (so she says, again), but also _“China’s stock market is really
different from other countries. The government surely has some measures to
control the movement.”_ I'm sure I've heard that before; people sure that the
magical government can somehow stop a market crash.

It would be interesting to work out how well her quoted comments match the
official PRC government line (and unofficial government line) at the time; if
she exists, is she a government mouthpiece, or just someone the journos know
is always good for a negative quote about the Chinese market, from the small
investor? I wouldn't be surprised if all these Bloomberg journos ever saw of
her was a controlled press release of suitable comments and sources from
China, for them to mine from to make their story.

------
hacknat
It's not surprising at all. There have been reports of construction companies
rebranding themselves as tech companies and doing a public offerings at P/E
ratios that would make the hucksters of Silicon Valley circa 1999 blush. It
will be interesting to see how it affects the rest of the world. That's the
unpredictable part.

~~~
jahnu
How exposed to China is the rest of the world? If it's not a lot then it kind
of doesn't matter as much.

------
Mikeb85
Look at a 5 year chart. The SSE was simply over-bought. Any trader would tell
you that.

Now why was it over-bought? Part of the reason is because of the Shanghai-Hong
Kong market link, which drove massive amounts of volume into Shanghai, and
traders took advantage by taking on large margin accounts. When the savvy
traders started booking profits, the rest were left to try cover their
positions.

The Hang-Seng (Hong Kong) dropped too, but by far less because it was priced
much better.

Anyhow, this has nothing to do with the Chinese economy, or even stock
fundamentals. It's just that equity prices were driven up too high by traders.

[http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r...](http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"range":"5y","allowChartStacking":true})

[https://ca.finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;...](https://ca.finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;range=5y)

~~~
seanmcdirmid
The Chinese economy isn't doing that great right now, so people were puzzling
over the stock market boom. But as you say, these two things are almost
completely separated at this point.

Now if someone could tell me where to park my RMB savings...real estate? Stock
market? Under my mattress? The real problem is that investment opportunities
in China really aren't that great.

~~~
zhte415
Easy opportunities aren't. By easy: click a switch and send money somewhere.

But financing is huge. A lot of people and businesses don't have sufficient
access to a functioning banking system or capital markets. Invest in small
businesses / people you know. You're in Beijing - move out to the places that
aspire to be more like a developed city, and just rinse and repeat.

~~~
seanmcdirmid
I have a job in Beijing and frankly like it; I'm not an investor or a business
guy, I'm just a programmer/researcher/geek who is living the life he wants to.
If I was in the states, I would just throw my money in safe investments and
buy a house; here all of that is impossible (well, you can do things with the
banks, but kind of dodgy). My best bet is just to transfer money back home and
play the American stock and real estate markets like my Chinese friends are
already doing :p

Business and investment in China is absolutely crazy: your partners are more
likely to screw you over than not, and in order to win you have to be
constantly on your toes. When public construction SOEs are rebranding as
internet companies, you can bet the smaller hole in the walls are doing the
same!

Every third-tier city wants to be like Beijing. For example, my wife's
hometown in Hunan (Chenzhou) has big aspirations but very little to offer. It
is just heart break waiting to happen. Apartments being built everywhere
shoddily without central heating...who wants to live in those?

------
dak1
That graph seems a bit sensationalist by using ~2800 as the base of its
y-axis, and the stocks are still up for the year.

It looks like the stocks are down about 20% from their high, which isn't that
unusual for a stock market (and probably is appropriate considering how much
stocks went up this year).

~~~
drzaiusapelord
A 20% plunge in the West would be a disastrous thing or at least generate
thousands of news articles about it, why does HN give a double standard to
autocratic states? I keep hearing about how the ruble devaluation and now this
are all perfectly fine. I don't think one article from Bloomberg is so
horrible. Hell, I don't even see this on the front page of google news. Where
is this massive sensationalism? Hell, is this even an issue on a site where
pretty much all its politics is sensationalism to extremist degrees?
Interesting what we find fault with here.

There's some real stupid bias on HN honestly.

~~~
Cookingboy
It has nothing to do with China being autocratic or not, it's simply a very
volatile market. The Chinese stock market is still UP for the year, and 20% is
just correction territory, it's not close to a "disastrous" thing considering
how quickly and how much it has gained recently. In fact, one may even argue
it's healthy.

~~~
drzaiusapelord
I'm certainly not suggesting its some great depression, but clearly its note
and newsworthy and this article reflects that. Why the protesting about the
article? What exactly is the problem? In autocratic regimes state media's job
is rally stocks and, yes, the lack of which is very telling, which is what
this article is about.

Again, what exactly is the problem here? If this was any Western economy,
HN'ers wouldn't be falling over themsleves trying to dismiss it as
sensationalist, especially when you consider the endless parade of anti-US
sensationalism that often dominates this site and its collective narrative.

~~~
codesushi42
Because Western economies have been in dire straits for over a decade. A drop
like that would be significant and unlikely to reverse. The West has no
economic growth engine to fall back on.

China has had so much astronomical growth that this drop doesn't undo all of
that overnight.

If it continues, and it may very well, then you have a story.

Also, it's not good to create fear in the general public which is another
reason to downplay this. If it's met with hysterical headlines, then the event
of a crash in the global markets will be a self fulfilling prophecy. Markets
react to group psychology and FUD in the general public.

~~~
gscott
I just read that China has 21 trillion in their banks from people saving. It
feels to me China has so many resources that they are unstoppable. Banks lend
10x the assets they have so that is 210 trillion available to lend. Not to
mention the assets that the government has itself. There are so many state or
partially state owned businesses that they can sell parts of. Even the debts
of creating whole cities, it just doesn't seem to me that there is going to be
any sort of damper on what China does. Especially with everyone wanting to
throw money at them to get into business there.

------
shostack
Anyone care to speculate how that might impact real estate (short and long
term), particularly US markets that have seen heavy Chinese investment?

~~~
Mikeb85
Probably not too much. These are just trading losses. The SSE is still up
quite a bit for the year.

------
jackgavigan
A month ago, the amount of borrowed money invested in Chinese stocks was over
$300bn. Margin calls will be exacerbating this drop in prices:
[http://www.taipeitimes.com/News/biz/archives/2015/05/23/2003...](http://www.taipeitimes.com/News/biz/archives/2015/05/23/2003618925)

------
myth_buster
Surely the times are interesting[0][1].

[0] [http://i.imgur.com/C77vR9t.png](http://i.imgur.com/C77vR9t.png)

[1]
[https://en.wikipedia.org/wiki/May_you_live_in_interesting_ti...](https://en.wikipedia.org/wiki/May_you_live_in_interesting_times)

~~~
stephengillie
The true insult is "May you live in boring times."

~~~
tormeh
History is usually not that fun for the people who living through it. With the
exception of the greatest minds in science, history is usually about people
dying violently or at least suffering a lot.

Boring times don't sound so bad to me.

------
skylan_q
The stock market is up 35% since March. I don't understand what's being
reported.

~~~
adventured
That the bubble has likely popped in Chinese equities.

$2 trillion - roughly 20%-25% - has been shaved off their markets in just two
weeks or so. One of the largest, fastest stock market drops in world history
in sheer dollar terms.

To put that in perspective, about 8%-10% of China's household wealth just
disappeared in two weeks (80% or so of all investors in the market are
individuals). The stock market run has been helping to bail out a lot of
homeowners that had previously bet on the real estate market continuing to go
up perpetually. If both crash at the same time, it's going to hammer China's
fragile economy (that has shrinking across the board already: exports,
imports, PMI, electricity usage).

------
curiously
_" China’s stock market is really different from other countries"_

Yeah, just add an opaque, government overseeing and controlling all
information of Chinese stocks. Nothing to see here folks.

------
ars
The graph is quite misleading by not being logarithmic - it makes the gain
seem smaller than it really is, and the loss larger.

A logarithmic graph will show that this drop is minor compared to the rise
before it.

~~~
adventured
Well here's the five year:

[http://i.imgur.com/3vMDYlx.jpg](http://i.imgur.com/3vMDYlx.jpg)

That's the setup to an inbound market disaster if I've ever seen one.
Especially given China's falling corporate earnings and all the other
blatantly negative signals in their economy right now. This market run
occurred solely due to margin, and not due to growth; the outcome was always
obvious ahead of time.

~~~
refurb
Wow! That market doubled in the past year? I knew it was hot but I didn't know
it was that hot. It will be interesting to see where this goes.

