There has been rampant maniacal speculative excess going on in China recently as their market broke out of a long term falling wedge and went parabolic. The Chinese people have been showing up to the party in droves opening up a record level of new margin trading accounts in a very short period of time.
Just today however, the market received a small dose of reality as Chinese stocks plunge the most in six years after regulators begin cracking down on margin lending.
'The Shanghai Composite Index sank 7.7 percent to 3,116.35 at the close, its steepest drop since June 2008.Citic Securities Co. (600030) and Haitong Securities Co., the nation’s two biggest listed securities firms, fell by the 10 percent daily limit after they were suspended from loaning money to new equity-trading clients and regulators said brokerages shouldn’t lend to investors with assets below 500,000 yuan. ' -Bloomberg
Just today however, the market received a small dose of reality as Chinese stocks plunge the most in six years after regulators begin cracking down on margin lending.
'The Shanghai Composite Index sank 7.7 percent to 3,116.35 at the close, its steepest drop since June 2008.Citic Securities Co. (600030) and Haitong Securities Co., the nation’s two biggest listed securities firms, fell by the 10 percent daily limit after they were suspended from loaning money to new equity-trading clients and regulators said brokerages shouldn’t lend to investors with assets below 500,000 yuan. ' -Bloomberg
Underneath the mania of the stock market China is weakening. China has been seen as the beacon of global growth for a while now as the Chinese go nuts building new structures. Unfortunately their optimism of migrating the people from the farms to the cities isn't coming to fruition quite like they had hoped. In fact the Chinese have now ended up with the precarious situation of entire cities that are mostly vacant, Ghost Cities.
There is a massive supply glut of vacant property sitting in China right now and as a result, property values are beginning to decline putting Chinese real estate companies at default risk. 'Concern is mounting that increasing financial stress among builders could spill over into a broader credit crisis in China. New-home prices fell in 65 of the 70 cities monitored in December and were unchanged in four, the National Bureau of Statistics said in a statement yesterday.'
There is a massive supply glut of vacant property sitting in China right now and as a result, property values are beginning to decline putting Chinese real estate companies at default risk. 'Concern is mounting that increasing financial stress among builders could spill over into a broader credit crisis in China. New-home prices fell in 65 of the 70 cities monitored in December and were unchanged in four, the National Bureau of Statistics said in a statement yesterday.'
China is a net oil importer and I suspect that is partly why their markets have been doing well but it is wise to use caution as it appears as if China is in their own fragile bubble. The Chinese stock market has been gripped in a mania of speculative fury and the citizens all want in on a piece of the action. I certainly cannot predict the future but from what I have gathered historically we see this kind of psychology much closer to significant market tops than bottoms. China has a lot more vacant property now but it looks as if the only thing they have manged to build is a House of Cards.
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