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| China-Japan-Koreas |
| China shares tumble as panic spreads |
| 2007-06-05 |
| China stocks tumbled 8.3 percent on Monday in their second biggest drop this decade, erasing $340 billion in market value and extending big losses from last week after the government hiked the share trading tax to cool a feverish bull run. In an apparent attempt by authorities to restore confidence, front-page editorials in official newspapers tried to reassure investors the market's medium- and long-term outlook was still positive, and that the tax hike was merely aimed at speculators. But that failed to stop selling by many of the anxious and often inexperienced individual investors who had jumped into the market in recent months for what seemed like easy money. "This is obviously panic selling, and the sentiment is quickly spreading across the market," said Wang Jing, deputy general manager at Everbright Securities. "But the fall is normal today, given the fact that the market has gone up so much. It won't be surprising if the index falls to about 3,000 points -- which would mean a 30 percent correction from the top." However, many analysts and fund managers said they did not believe the government, which has made a strong stock market central to its economic reforms, would permit an extended slide which could fuel social unrest or threaten China's rapid economic expansion. The key index has now lost 15.3 percent from last Tuesday's record intra-day high. A fall of 10 percent is an internationally accepted definition of a bear market in stocks. Global stock markets, which were roiled by a heavy Chinese market sell-off in late February, appeared to be taking the latest slump in stride, though many Asian markets came off the day's highs as the rout in Shanghai worsened. "I knew the market would go down, but I did not expect it would be this fast. After a small plunge, it should go up, but it is not going up," said Madame Wang, a pensioner in her 50s, who put some of her savings into stocks during the bull run. "Next time I will remember -- once the market falls, I will sell all my stocks." Many fund managers and analysts in Asia said the index, which had risen 62 percent this year to last Tuesday's close after surging 130 percent in 2006, had room to fall much further in coming days as the excesses of the bull run were corrected. But many also said they did not believe the market as a whole was going into freefall. Most worrying to analysts were deep falls in some of the blue chips favored by institutional investors, since those stocks had stayed firm last week even as speculative shares tumbled. Oil refiner Sinopec, which had risen 16 percent over the final three days of the week, sank its 10 percent daily limit to 13.65 yuan. Industrial & Commercial Bank of China, the country's biggest bank, dropped 8.1 percent to 4.99 yuan. The Shanghai Composite Index ended the day at 3,670.401 points, its lowest level since April 25. Losing stocks overwhelmed gainers by 846 to 17, with about 466 shares plunging their 10 percent daily limits. Turnover in Shanghai A shares was active at 143.0 billion yuan ($18.7 billion), but down sharply from Friday's 224.7 billion yuan, suggesting many investors were pulling out of the market. "Most new retail investors are too speculative to envision the mid- to long-term positive market trend. Their exit will cause a market landing, be it hard or soft," Morgan Stanley said in a report. Traders see strong technical support for the index around 3,600, where it briefly peaked in mid-April. That level would still leave the market up 35 percent from the start of this year. "Since the index has even fallen below 3,700 now, I believe the correction is about over," said Zheng Weigang at Shanghai Securities. Another disillusioned investor at an Everbright Securities branch in Shanghai's financial district, a woman in her 30s surnamed Xu, said: "I used to have confidence in the stock market. But how can I have confidence now that it has fallen so much. I have no more confidence. Even if the government wants to regulate the stock market, it should not be done like this." ($1 = 7.65 yuan) |
| Posted by:Anonymoose |
| #10 Tee Hee Hee! |
| Posted by: bigjim-ky 2007-06-05 22:20 |
| #9 How is the coming slowdown of Chinese imports going to affect their stock market, I wonder? The FDA just blocked Chinese made toothpastes because when tested they were found to contain diethylene glycol. As a matter of public safety they will have to expand the testing, and when they do even more interesting ingredients will be discovered... leading to more product/manufacturer blocks. Life is about to become extremely unpleasant for the Chinese, and losing face is only the least of their imminent problems. |
| Posted by: trailing wife 2007-06-05 22:15 |
| #8 |
| Posted by: Bright Pebbles 2007-06-05 22:06 |
| #7 China is not so much a bubble economy as a hot money economy. Too much money sloshing around relative to opportunities to spend/invest that money. Will it lead to 1997 type financial meltdown? Probably. |
| Posted by: phil_b 2007-06-05 21:36 |
| #6 #4: "the wealth of important people in China may be in jeopardy" Awwwwwwwww.... |
| Posted by: Barbara Skolaut 2007-06-05 17:54 |
| #5 http://finance.yahoo.com/intlindices?e=asia I gather that most of the panic selling has ended. |
| Posted by: Anonymoose 2007-06-05 16:54 |
| #4 Apparently, few insiders got forewarned about this, so the wealth of important people in China may be in jeopardy. Does anyone know whether this is the case, or do we have inside manipulation at play ? |
| Posted by: Grusosh Borgia9229 2007-06-05 11:00 |
| #3 China stocks tumbled 8.3 percent on Monday in their second biggest drop this decade, erasing $340 billion in market value and extending big losses from last week after the government hiked the share trading tax to cool a feverish bull run. More government market manipulation. While ours might change the prime lending rate, this is a far more serious intervention. The loss of $340 BILLION from a single day's correction speaks of heavily inflated and over-valued stock prices to begin with, much like what I would expect from China's closed economy. In an apparent attempt by authorities to restore confidence, front-page editorials in official newspapers tried to reassure investors the market's medium- and long-term outlook was still positive, and that the tax hike was merely aimed at speculators. One can only wonder at just how much of China's market activity is based on "churning" accounts versus actual strategic trading. I doubt online trading in anywhere near as strongly in place as it is here in America. In fact, it appears to be all of one percent of overall traffic. China's securities regulators recently issued provisional regulations for on-line stock trading, thereby legalizing a business that has been growing in China but without the blessing of the regulators. The regulations issued by the China Securities Regulatory Commission (CSRC) ban non-securities companies such as Internet portals from engaging in any kind of online brokerage. Even securities companies which have licenses for stock trading must apply for qualification for Internet brokerage, according to the regulations. The CSRC demands Internet stock brokers separate their online trading system from other systems. Since 1997, more than 20 securities companies in China have opened online stock trading. According to CSRC chairman Zhou Xiaochuan, online trading now accounts for one percent of the total stock trading volume in China. The fact that online trading has just recently come under regulation bespeaks of a wide-open market and one that is easily subject to irregularities. Compare this to American online trading: Research done as CS First Boston determined that the volume of American online stock trading is increasing at the astronomical rate of 30 to 40 percent per quarter. Internet brokerage accounts now account for 25% of all retail stock trades and 15% of total stock trades, with both percentages rapidly increasing. We are now seeing a steady movement away from mutual funds and traditional brokers and towards deeply-discounted brokers operating over the Internet. With such a minuscule amount of China's stock trading being done online, it leads me to believe that their market is much more subject to manipulation, by both government and financial institutions alike. It will be extremely interesting to see if overall financial numbers, like price to earnings ratios and other evaluations, will even be made available to the public. Ever since communist China's birth such critical data has always been regarded as a state secret. With so much of Chinese big business being held by PLA top-brass, release of those numbers might cast an extremely unfavorable light upon China's much vaunted "redistribution of wealth." But that failed to stop selling by many of the anxious and often inexperienced individual investors who had jumped into the market in recent months for what seemed like easy money. Also known as shorn sheep. Zenster, comment? Two words: Bubble Economy. |
| Posted by: Zenster 2007-06-05 04:09 |
| #2 Mr. gro*goru is High. -->Leb on Paleo ;-) |
| Posted by: RD 2007-06-05 03:33 |
| #1 Zenster, comment? |
| Posted by: gromgoru 2007-06-05 00:51 |