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Q: Why are China stocks falling? is it because of the maritime conflicts?[edited]

I keep reading about the South China sea issue with Philippines, Vietnam, Taiwan. and the Daiyu issue with japan. Do these conflicts somehow affect the Chinese stock market?  

8 years 37 weeks ago in  Money & Banking - China

 
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Those rocks in the sea and the stock market crash are not quite related... Yet.

 

Why the stock market is crashing ?

* The majority of the investors (I read 80%) came in recently, are your average Zhou, with the education that goes with them. Very emotional, decision not based on research but on rumors. They understood "stock market" as "magic money making", a casino where everyone wins. The medias even encouraged them ! Perfect climate for baseless speculation, insider fraud and pump & dump.

* The good old real estate investment is not as good as it used to be. So with low interest rate (ie. barely equal to official inflation, probably less than actual inflation), people try to invest in the national stock market, short of other options.

* A lot of those investors use borrowed money to gamble on the stock market. So those stocks values can be mostly artificial Monopoly money. It climbed high, it will fall as low as it started if indeed was mostly made on borrowed money.

* A lot of new company on the stock market are widely over valued, empty shells, pigs with lipstick on their faces. Example : companies into floor tiling suddenly become companies into social medias. No IT experience, none of the work force for it, but whatever, simply declaring that makes you a speculator star.

* When a lot of company in China have to slowdown and have debts, how they have so much value ? That calls for a market correction. It's a bit like running while being attached to a spring : it can work for a while, but eventually the spring wins and you are propelled back close to your starting point. Speculation is a musical chair game. Current measures to calm the stock market are likely to scare small investors even more (ie. freezing stocks for a while, they will crash even faster once unfrozen, as it's a way to say that those stocks have a very artificial value.).

If the crash becomes a huge monster where a lot of people goes angry, you might think that a good old conflict might be used as a diversion. But we are not quite there yet, and apathy is incredible in Mainland.

andy74rc:

3 thumbs up.

8 years 37 weeks ago
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Iron12:

Interesting and enlightening answer, im just wondering if this is a good time to buy any shares...would that be wise?

8 years 37 weeks ago
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icnif77:

Yes, certainly 'buy' time by this '0H' poster:

 

FL_Conservative's picture

Sum ting wong. 

 

8 years 37 weeks ago
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DrMonkey:

@Iron12 Between the government micro-managing the stock exchange in a knee-jerk fashion, the totally random behavior of most investors, the problem of getting any reliable information about anything... it's not a great idea, unless you see it as a lottery.

8 years 37 weeks ago
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Englteachted:

No, because they haven't reached the bottom. That is why 43% of the companies suspended trading. They know where the bottom is. 

8 years 37 weeks ago
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icnif77:

Doesn't matter what you say Chin-ex recent drop isn't significant comparable to yearly gain: -30% : +70%angel.

Late arrivals to Chin-ex get foked, because of trading with margin, which really looks like free credit, but only if your stock goes up. In flush-out margin multiplies with immediate collection.

Comment:

Antifaschistische

The purpose of the stock market, is to allow people to [get rich by] selling 'fractional ownership of their company' to others (sheeple), for more than what it is worth to them....most of the time..way way way way more...then, you hope that the train of sheeply behind the intial buyers, are willing to even pay more.

8 years 37 weeks ago
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expatlife26:

Good analysis Strangelove

8 years 37 weeks ago
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dongbeiren:

I wonder which wumao downvoted this

8 years 37 weeks ago
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8 years 37 weeks ago
 
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Posts: 19788

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Chinese media blame Soros:

http://www.zerohedge.com/news/2015-07-08/chinese-media-blames-soros-host...

 

 

According to the analyst, massive funds entered the futures market, building a short position and leading to declines in the stock markets. The size of the funds and the sophisticated trading methods are beyond the ability of Chinese institutional investors, the analyst said.

 

In fact, Bill Gross of Janus Capital, a co-founder of global investment firm PIMCO, said in early June that the Shenzhen Stock Exchange's Component Index presented perfect short-selling opportunities.

 

At the time, the index was at a seven-year high but plummeted 30% on Gross's comments. Morgan Stanley and Credit Suisse have also been bearish on Chinese shares recently.

 

Professional traders are always cautious, when price go up too fast. However, Chinese professional and retail investors aren't driven by value investing, but just by gambling, and they disregarded 'losing' as other part of the gamble.

Banks in China gave loads of credit to investors, what makes 'gambling game' much riskier, because one must return margin, doesn't mater stock price is below entry point. If you multiply this by brazillion Chinese (investors), you have an A, why so sudden drop.

Technical chart readers see SSE drop is only half way down, and first the most optimistic stop is a bit bellow 2000 level. 

 

http://www.zerohedge.com/news/2015-07-08/leveraged-chinese-“investors”-learning-painful-lesson

 

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"allowChartStacking":true}

 

jetfire9000:

Thats a nice observation actually.  The chinese people themselves blame soros too.  They seem very well acquainted with soros.  Ive been told by super informed Chinese,  that the US government visits soros and he does what they tell him to. 

8 years 37 weeks ago
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icnif77:

Ohh well, it's just an excuse, or 'it wasn't us (Gov.)'. Reality hurts doesn't matter who's to blame.

Some comments on '0H' below the text are hinting on most possible US involvement in Chin-ex crash (rumors), so OP is onto something.

'Tectonic plates are moving' with US losing 'world's making decision strength' economically and politically.

8 years 37 weeks ago
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icnif77:

 
Manthong's picture

How you say "Get me out!" in Mandarin?

 

8 years 37 weeks ago
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Englteachted:

Chinese are taught that 1 man can't make a difference.

8 years 37 weeks ago
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icnif77:

@tits: '0H' had pic with 'man facing the tank' and text: 'Arrest all shorts in Chine-ex'

 

http://www.zerohedge.com/news/2015-07-08/china-crash-protection-costs-hit-record-highs

8 years 37 weeks ago
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Posts: 1198

Shifu

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Stocks that go up fast can also come down fast. When stock prices are going up people want to buy and this increases the demand for and the value of the stock. If some people believe that a stock is over-valued then they will begin to sell, the resulting dipping of the stock price causes some people to quickly sell or panic sell. China's economy has been cooling for a while and there is also the problems in Greece. I wouldn't think that territorial disputes are much of a cause.

 

icnif is right. Many small investors in China will have been burned.

icnif77:

'flush out' in traders (and plumbers -LOL) lingo.

Now, 'value': there's no such a thing in Chin-ex. It's just 'my neighbour has it, me too.....' similar to i-phone.

I wonder, how 'face thingy' works now.

8 years 37 weeks ago
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Shifu

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I'm no expert but I'd point to the fact that Chinese stocks went up 150% in a year when the economy was actually decelerating - the faster they rise the harder they fall, especially with the herd mentality. In spite of the "crash" Chinese stocks are still UP an astonishing 70% over the past year. There could be a lot more pain ahead. 

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The conflicts you mention are international disputes, not domestic ones. Stock market is crashing because overvalued & reasons others state above 

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Those rocks in the sea and the stock market crash are not quite related... Yet.

 

Why the stock market is crashing ?

* The majority of the investors (I read 80%) came in recently, are your average Zhou, with the education that goes with them. Very emotional, decision not based on research but on rumors. They understood "stock market" as "magic money making", a casino where everyone wins. The medias even encouraged them ! Perfect climate for baseless speculation, insider fraud and pump & dump.

* The good old real estate investment is not as good as it used to be. So with low interest rate (ie. barely equal to official inflation, probably less than actual inflation), people try to invest in the national stock market, short of other options.

* A lot of those investors use borrowed money to gamble on the stock market. So those stocks values can be mostly artificial Monopoly money. It climbed high, it will fall as low as it started if indeed was mostly made on borrowed money.

* A lot of new company on the stock market are widely over valued, empty shells, pigs with lipstick on their faces. Example : companies into floor tiling suddenly become companies into social medias. No IT experience, none of the work force for it, but whatever, simply declaring that makes you a speculator star.

* When a lot of company in China have to slowdown and have debts, how they have so much value ? That calls for a market correction. It's a bit like running while being attached to a spring : it can work for a while, but eventually the spring wins and you are propelled back close to your starting point. Speculation is a musical chair game. Current measures to calm the stock market are likely to scare small investors even more (ie. freezing stocks for a while, they will crash even faster once unfrozen, as it's a way to say that those stocks have a very artificial value.).

If the crash becomes a huge monster where a lot of people goes angry, you might think that a good old conflict might be used as a diversion. But we are not quite there yet, and apathy is incredible in Mainland.

andy74rc:

3 thumbs up.

8 years 37 weeks ago
Report Abuse

Iron12:

Interesting and enlightening answer, im just wondering if this is a good time to buy any shares...would that be wise?

8 years 37 weeks ago
Report Abuse

icnif77:

Yes, certainly 'buy' time by this '0H' poster:

 

FL_Conservative's picture

Sum ting wong. 

 

8 years 37 weeks ago
Report Abuse

DrMonkey:

@Iron12 Between the government micro-managing the stock exchange in a knee-jerk fashion, the totally random behavior of most investors, the problem of getting any reliable information about anything... it's not a great idea, unless you see it as a lottery.

8 years 37 weeks ago
Report Abuse

Englteachted:

No, because they haven't reached the bottom. That is why 43% of the companies suspended trading. They know where the bottom is. 

8 years 37 weeks ago
Report Abuse

icnif77:

Doesn't matter what you say Chin-ex recent drop isn't significant comparable to yearly gain: -30% : +70%angel.

Late arrivals to Chin-ex get foked, because of trading with margin, which really looks like free credit, but only if your stock goes up. In flush-out margin multiplies with immediate collection.

Comment:

Antifaschistische

The purpose of the stock market, is to allow people to [get rich by] selling 'fractional ownership of their company' to others (sheeple), for more than what it is worth to them....most of the time..way way way way more...then, you hope that the train of sheeply behind the intial buyers, are willing to even pay more.

8 years 37 weeks ago
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expatlife26:

Good analysis Strangelove

8 years 37 weeks ago
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dongbeiren:

I wonder which wumao downvoted this

8 years 37 weeks ago
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8 years 37 weeks ago
 
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Governor

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Just read a funny story sent by one of the Chinese colleague, goes something like this... A beggar went to the market and started to beg, a lot of people ignored him and went on their way but few of them did give him some money, everyone that gave him money, he asked and wrote down their address, after few hours a Bentley rolled down right in front on him, he climbed in... and he went to every person who gave him money and gave them 10x against their original amount... The news spread in the market like the wildfire..  

next day the man returned, the market was packed with people, everyone pounced on him with the money 100,200,500 people wrote their addresses on the back of the notes... within an hour the man left with lot of money to never return...

Well, you guessed it... 

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8 years 37 weeks ago
 
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Stock markets are usually controlled by the rich 1% trying to build up their coffers by selling the idea you can make tons of money to the other 99%. Over and over again.

 

Sometimes, if people from the 99% are lucky... or just in the know... they can take out their funds at the same time the 1% do and make some money.

 

But usually, they the don't and get screwed over. The stock market is an insanely easy way to part a fool and his money.

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8 years 37 weeks ago
 
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