Right, so today the Shanghai Composite is up 5.6 per cent, Shenzhen is up 4.8 per cent and ChiNext has gained 6.3 per cent. And we have no idea what’s going to happen tomorrow
Over the past few days we got a clear government push to keep this thing up — including pushing something like an extra RMB1tn into the system via RRR and benchmark rate cuts over the weekend and, today, fund managers being told to help out — but it’s unclear how long that can keep things contained following near 20 per cent falls in these markets since their (admittedly v impressive) peaks in early June.
As of yesterday it was: not much at all as markets tumbled. As of today it’s: a bit more than that as they don’t.
To help clear things up, here’s Anne Stevenson-Yang of JCap Research with her most recent note: Read more
We’ll tear ourselves away from Greece to point out that Chinese markets are totally normal.
Title wise, That was nuts. Is this the crash? was already taken. In this exact context. Last week.
So… this time the Shanghai Comp has just closed down 7.4 per cent (with some 70 per cent of stocks hitting downward limits), Shenzhen fell 7.9 per cent while ChiNext dropped 8.9 per cent. Read more
Still rising until September based on broker capital, if you believe Macquarie.
And here is the bank, with our emphasis, after last week’s Chinese equity dive amid stories of broker crackdowns:
Last week’s sharp A-Share correction creates an opportunity for us to update our margin database and charts. It seems that hardly a day has gone by in recent weeks without some discussion of media reports about broker “crackdowns” on Chinese margin lending. But it may be more instructive to observe what brokers and their customers actually do rather than simply observing what the media reports they are doing. This is because the aggregate data on margin lending tells a very different tale from the “tightening” narrative.
Margin positions have continued to spike, climbing 16% MoM and 123% YTD to reach a new high of RMB2.3 trillion as of 18 June. This is 4.6x higher than a year ago. It brings the ratio of margin positions to market cap up to 3.4%, which is still below peak levels achieved in Taiwan in the 1990s. However, as noted previously, margin positions to free float – our preferred metric for considering the possible share overhang – is now 8.5%. Admittedly these numbers become less shocking with time, and cross-country comparisons are fraught with apples to-oranges risks, but we’ll say it one more time – this level of margins to free float is higher than any historical example that we can find.
From Morgan Stanley’s China Pulse survey first (via @jjeswani):
In June, more than half of the investors believed Shanghai A-shares were already in a bubble vs. only 12% holding this view in January.
Seriously, it’s foolproof and definitely not something we’ve seen before in other bouts of market mania.
From the WSJ:
Chinese companies are turning to an unlikely source for profits in the soft economy: the country’s red-hot stock markets.
From Bocom’s Hao Hong, he of the “price to whatever ratio”, we get today’s China nuttiness fact du jour*:
When calculated on a free-float adjusted basis, Chinese market’s average holding period is about one week – a hallmark of intense speculative trades in the market. Everyone is busy looking for the greater fool. Note that at the height of the Taiwanese bubble in 1989, every available share on the exchange changed hands close to twenty times per annum. That is, the free-float shares on Taiwanese exchange changed hands every 15 days on average.
From SocGen’s Wei Yao, a chart we’re very tempted to plonk beside one of China’s equity markets:
Actually… Read more
Since it’s that time of the year again, here’s the state of play so far, courtesy of Deutsche (do click to enlarge):
On the standout star performer — Chinese equities — we’d recommend checking in on Matt’s recent piece on the potential upsides of China’s bull run — the question being, can it strengthen the real economy? And we’d add to Matt’s thoughts, quickly, that allowing broke companies to change out their unpayable debt into equity shouldn’t be underestimated as a reason for this rally, rather than as a byproduct. Read more
We assume we’ve made our position on this pretty clear… but apparently Citi remain unconvinced.
To wit: “If the Chinese market were to double from here it would indeed be in bubble. The same is true for Asia, a doubling would put us back at 3x book which over the last 40 years has been the peak – four times. When we get close to those levels we will be in a bubble, till then it’s a bull market.”
From their GEMs team, which has been preaching China equities for quite a while (with our emphasis): Read more
Just going to leave these few charts here for a second…
That’s from BNP Paribas, this is via Tom Orlik and a few others: Read more
A Chinese rendering of jusqu’ici tout va bien courtesy of Bloomberg:
The chief China strategist at Bocom International Holdings Co. points to soaring price-to-earnings ratios, the shrinking yield advantage that stocks offer over bonds and the fact that mainland-listed equities now trade at a 34 percent premium over nearly identical shares in Hong Kong.
So what’s Hong’s advice to investors?
Keep buying, of course.
Biggest fall in five years that, even if it’s still up 35 per cent this year. Might be time to talk about the potential consequences of all this, no? Read more
Nice from Simon Rabinovitch at the Economist:
One middle-aged man, Mr Xu, had come to meet a manager to inquire about how to subscribe to initial public offerings; their average first-day gain has been about 40% this year. He said he had taken the afternoon off work for the meeting and could hardly conceal his glee. “I’ve been trading since 1992 (just two years after the Shanghai Stock Exchange was established) and I guarantee you this bull market will last,” he said. He confessed to getting badly bruised by the last big one – his portfolio of 500,000 yuan had swollen to 3 million yuan by 2007 at the peak of the market, before falling back to its original level.
At the other end of the spectrum in terms of experience was Ms Zhou, 25, an interior designer with dyed-blonde hair. Like many other young professionals, she had previously put a big chunk of her savings in an online investment fund marketed by Alibaba, an e-commerce company. The fall in interest rates has reduced the return on that fund, pushing her to look for alternatives. “I had been thinking for a while about buying stocks but I had to travel for work and missed the best opportunity,” she sighed. “I will be conservative at first. Just one or two thousand yuan. Or maybe ten thousand.”
Which says a lot about the mechanical nature of this “super-bull” run. There’s simply quite a bit of money in China and a limited number of places for it to go. Once one is found… Read more
Consider this from Gavekal’s Chen Long on the run up in China’s A-shares:
Today was just an ordinary day:
As FastFT noted, Shanghai-listed shares jumped 6 per cent in six minutes in morning trade, despite opening the day lower. The exchange’s official Sina Weibo microblog posted shortly afterwards that operations were running normally. Read more
Yes, we know it’s not new, but the divergence between stock markets and commodity prices is now looking extreme. Consider this chart from Julian Jessop at Capital Economics…
Lately it seems like no amount of happy newsflow about the latest Greek reprieve or positive US data can lift the Shanghai Composite:
Asian stocks fell on Monday after S&P downgraded the US credit rating, Bloomberg reports, extending the worst global slump since the bull market began in 2009. There were signs that downgrade had already been priced in, however, after a solif week of losses in many equities markets. Gold again hit new records, heading close to $1,700 an ounce, and the Swiss franc also climbed against the dollar. By late morning in Hong Kong, the FTSE All-World Asia Pacific index excluding Japan was down 2.4 per cent, having lost 8.5 per cent last week in a global market rout, the FT reports. The Hang Seng was 4.2 per cent lower at 20,064.45, while in Tokyo the Nikkei 225 was down 1.3 per cent at 9,178.03 and in Sydney the S&P/ASX 200 fell 1.9 per cent to 4,027.70. On the Chinese mainland, the Shanghai Composite tumbled 4.8 per cent to 2,500.03. However Treasuries were little affected in Asian trading, with US 10-year bond yields rising 2 basis points from Friday to 2.58 per cent. Crude oil futures fell 3.3 per cent in New York. Several bankers told the FT that the US debt ceiling brinkmanship in July had already spurred much of the preparation for such an event.
1. Create a favorable public opinion climate for the two holidays [including Spring Festival] and “two meetings” (NPC and CPPCC). Do a conscientious job of channeling [public opinion] on such hot topics as income distribution, the stock market and property market, employment and social security, education and public health and sanitation, and safe manufacturing, explaining the issues and dissolving tensions.
A successful sale of Portuguese bonds has unleashed a wave of buying, as oil and share prices continue their rise to fresh two-year highs, reports the FT’s global market overview. The FTSE All-World equity index is up 1.5 per cent – a fresh 27-month high – commodities are firmer and the dollar is weaker as residual optimism regarding global growth prospects continues to see racier assets trundle higher. The S&P 500, up 0.8 per cent, is at its best level since September 2008, with the ongoing $600bn of Federal Reserve quantitative easing and the sharp rise in oil prices providing further support, especially to energy shares. US 10-year yields, the global benchmark, are up 1 basis points to 3.35 per cent, falling 7 basis points from their peak after an auction of $21bn of 10-year notes saw demand push the yield at sale lower than expected. The FTSE Asia Pacific index is up 0.9 per cent, supported by a 1.5 per cent rise in Hong Kong as HSBC led banks higher, while energy producers got a boost from higher crude oil prices. Shanghai added 0.6 per cent as surging coal prices helped miners. Japan’s Nikkei 225 was flat , though an overnight slip for the yen lent support to some exporters.
Global stocks are brushing their best levels in nearly 27 months, before the collapse of Lehman Brothers, as investors continue to place bets that better economic growth in 2011 will power risky assets yet higher, the FT’s global market overview reports. The FTSE All-World equity index was up 0.2 per cent to 216.7, commodities were mixed and the dollar lower. Markets were unfazed as South Korea began a large-scale military exercise near the border with the North. The Kospi index fell just 0.03 per cent on soft technology stocks. Hopes that an improvement in the US economy will add an extra boost to growth in 2011 is continuing to buoy sentiment, pushing the FTSE Asia Pacific index up 0.4 per cent, close to the best levels since July 2008. Australia’s S&P/ASX 200 rose 0.4 per cent to a six-week high, after Riversdale Mining climbed as much as 2.2 per cent to A$16.84 on the back of Rio Tinto’s formal $3.9bn offer. China’s Shanghai Composite was down 0.8 per cent as oil refiners lost ground on concerns that operating costs would increase following recent gasoline and diesel price hikes. Hong Kong’s Hang Seng was off 0.1 per cent and India’s Sensex was down 0.2 per cent. The FTSE 100 has tickled the 6,000 level in early skirmishing, up 0.2 per cent at 5,998 as resources stocks continue their storming run. The FTSE Eurofirst 300 index was up 0.1 per cent. The dollar index was down 0.3 per cent at 80.45, while the Korean won was up 0.4 per cent to the greenback as traders brushed off any worries surrounding Seoul’s military exercises.
It looks like the Santa Rally is flagging, but then the old boy has had a good run, the FT’s global market overview reports. Bourses in Europe opened flat, the FTSE All-World index was up just 0.06 per cent, US stock futures were little changed and many industrial commodities were weaker. The FTSE Asia-Pacific index was up 0.1 per cent. Japan’s Nikkei 225 dipped 0.2 per cent, though in earlier trading exporters got a lift from figures showing a 9.1 per cent rise in Japan’s exports in November compared with a year earlier. South Korea’s Kospi Composite was 0.1 per cent higher after investors remained largely unruffled by South Korea’s announcement that it would conduct a live-firing drill on Thursday near the border with the North. Hong Kong’s Hang Seng index rose 0.1 per cent, with oil-related shares benefiting from Beijing’s increase in gasoline and diesel prices. But on the mainland the Shanghai Composite fell as the rally in property stocks faded. India’s Sensex was up 0.2 per cent and Australia’s S&P/ASX 200 rose 0.1 per cent. The FTSE Eurofirst 300 was up just 0.1 per cent, while London’s FTSE 100 was flat as the oil and gas sector shed some of its recent gains.The euro has reclaimed the 200-day moving average around the $1.31 level, though judging from moves in other crosses this is as much about a period of dollar weakness than it is of single currency strength. The euro was up 0.3 per cent to $1.3132, while the dollar index, which tracks the buck against a basket of peers, was down 0.2 per cent to 80.50.
An easing of tensions between North and South Korea and supportive comments on the eurozone from the Chinese government emboldened bulls, reports the FT’s global market overview. The FTSE All-World equity index was higher by 0.8 per cent and copper was leading commodities as the red metal hits a fresh record. The euro was firmer, though delve deeper and it is clear Chinese authorities are less sure of the prospects for the currency bloc. Nevertheless, for now, the market mood is upbeat, and the S&P 500 on Wall Street was higher by 0.5 per cent to a fresh 27-month peak, gaining support from more M&A activity and after Adobe beat earnings forecasts. The FTSE Asia Pacific index added 1.1 per cent, and South Korea’s Kospi index gained 0.8 per cent as the tensions on the Korean peninsula eased. Japan’s Nikkei 225 rose 1.5 per cent, after the Bank of Japan left its ultra-loose monetary policy unchanged, as widely expected. China’s Shanghai Composite added 1.8 per cent, as funds picked up property stocks that have had a difficult time of late on worries over Beijing’s drive to cool speculative activities. Hong Kong’s Hang Seng advanced 1.6 per cent, with energy stocks in good form as the winter draws in. A better day for broader risk appetite was initially taking its toll on “safe” sovereign bonds, though losses were minimal. The yield on the US 10-year note is down 1 basis point to 3.33 per cent
An easing of tensions between North and South Korea and supportive comments on the eurozone from the Chinese government has emboldened the bulls, the FT’s global market overview reports. The FTSE All-World equity index was higher by 0.5 per cent, copper was leading commodities as the red metal hit a fresh record, and the dollar was slipping as risk appetite picked up. The FTSE Asia Pacific index was up 1.1 per cent, and South Korea’s Kospi index gained 0.8 per cent as the tensions on the Korean peninsula eased. Japan’s Nikkei 225 rose 1.5 per cent, after the Bank of Japan left its ultra-loose monetary policy unchanged, as widely expected. China’s Shanghai Composite added 1.8 per cent, as funds picked up property stocks that have had a difficult time of late on worries over Beijing’s drive to cool speculative activities. Hong Kong’s Hang Seng advanced 1.5 per cent, with energy stocks in good form as the winter draws in. Australia’s S&P/ASX 200 index advanced 0.7 per cent and India’s Sensex was up 0.8 per cent. The FTSE Eurofirst 300 was up 0.5 per cent and London’s FTSE 100 was higher by 0.5 per cent, with miners and energy again in the driving seat. The dollar is suffering from the improved mood across the market as its haven attractions wilt. The dollar index, which tracks the buck against a basket of peers, was down 0.5 per cent to 80.27.
European bourses have opened mixed as seasonal bullishness suffers a chill, reports the FT’s global market overview. Cold war-type tensions in Korea, the cold shoulder for the euro and the cold weather affecting much of the continent means a difficult start to the holiday-shortened trading week. The FTSE All-World index was flat, the FTSE Eurofirst 300 was higher by 0.1 per cent and London’s FTSE 100 was off 0.1 per cent as miners, banks and retailers fell back but gas and electricity groups saw buyers. The FTSE Asia-Pacific index was down 0.4 per cent with South Korea’s Kospi, which at one point was off 1 per cent, losing 0.3 per cent. Japan’s Nikkei 225 fell 0.9 per cent and Australia’s S&P-ASX 200 declined 0.6 per cent. In China, the Shanghai Composite lost nearly 3 per cent in early trade as worries about tighter monetary conditions also affected sentiment. The SCI finished off 1.4 per cent, while Hong Kong’s Hang Seng index was lower by 0.8 per cent. The geopolitical concerns are helping support the traditional haven currencies such as the dollar, Swiss franc and yen, though moves are meagre in early European trade. The buck was up 0.1 per cent on a trade-weighted basis to 80.41, while the euro was down 0.1 per cent to $1.3166 as eurozone debt woes weigh.
Trading was cautious as dealers awaited the next developments in the long-running eurozone fiscal saga, the FT’s global market overview reports. The FTSE All-World equity index was down 0.3 per cent following a soft showing in Asia, while commodities were mixed, the dollar weaker and core bond yields off their highs. The FTSE Asia Pacific Index was down 0.3 per cent, but volumes in many centres were thin as traders continue to close positions ahead of the year end. South Korea’s Kospi Composite fell 0.4 per cent, the market taking a breather after hitting a three-year high on Wednesday, while the Shanghai Composite and Hong Kong’s Hang Seng lost 0.5 per cent and 1.6 per cent, respectively. In Shanghai, banks lost ground on continued concerns about additional tightening measures from Beijing. Trading was cautious ahead of the Spanish debt auction. The FTSE Eurofirst 300 was up 0.2 per cent and London’s FTSE 100 was higher by 0.3 per cent, with bask still under some pressure on sovereign debt exposure concerns. The dollar index, which tracks the greenback against a basket of its peers, was up 1.1 per cent to 80.22 in the previous session. The euro was up 0.2 per cent to $1.3240 and sterling, which fell sharply on Wednesday after UK labour data showed the jobless total and unemployment rate rising for the first time in six months, was up 0.3 per cent at $1.5593.
Risky assets took a step backwards, led by a decline in the euro after Moody’s said it may downgrade Spain’s credit rating and pushed along by still-rising US interest rates, reports the FT’s global market overview. Moody’s said it was putting Spain’s Aa1 rating on review for possible downgrade, citing Madrid’s large debt and its funding requirements in 2011. But a batch of positive US economic data had seen investors buying the dollar and giving a small lift to Treasury yields, all of which weigh on the euro, which was down 0.8 per cent at $1.3273. Treasury yields were also higher, escaping the orbit of haven flows and real money buyers attracted by rising rates. The benchmark 10-year yield was up 4 basis points to 3.516, its highest in seven months. The 30-year was nearing an eight-month high at 4.494 per cent, up 7 basis points. The FTSE Asia Pacific index fell 0.9 per cent after hitting its highest intraday level in 29 months on Tuesday. Sentiment in Asia was further damped by the Bank of Japan’s Tankan survey for December showing that confidence among big manufacturers fell for the first time in seven quarters. Japan’s Nikkei 225 dipped 0.1 per cent. Hong Kong’s Hang Seng was hit by the Moody’s news, with a late slide leaving it down 2 per cent. Airlines struggled on concern of lower profits while expectations of additional monetary tightening measures hit developers. The Shanghai Composite shed 0.5 per cent and India’s Sensex was down 0.8 per cent.