China Halts Stock Trading 2'd Time in 4 Days

Discussion in 'Business & Economics' started by Yazata, Jan 7, 2016.

  1. Yazata Valued Senior Member

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    5,902
    It looks like Monday's rout isn't over. On Thursday morning January 7, the Shanghai and Shenzen stock markets were halted for 15 minutes, 13 minutes into trading, when the CSI 300 index fell 5% and triggered 'circuit breakers'. When trading was resumed 15 minutes later, the bottom totally fell out in panic selling and the markets were shut down for the day minutes later, with Shanghai down more than 7% and Shenzen down more than 8%, after only about 30 minutes of trading.

    http://asia.nikkei.com/Markets/Equities/China-stocks-slump-7-triggering-circuit-breaker

    It will be interesting to see where the other Asian markets close and what the effects will be in Europe and the US later in the day.
     
    Last edited: Jan 7, 2016
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  3. joepistole Deacon Blues Valued Senior Member

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    Let's remember, China represents 13% of the world economy. It represents only a few percentage points of the US stock market earnings. So if China vanished tomorrow, only 13% of the world GDP would disappear. But China isn't going to vanish tomorrow or anytime in the foreseeable future. China has some very serious problems. But it has had them for a long time. On the good side, China has the capacity to fix its problems. The question is, will it?

    China's growth is slowing. That's normal, China cannot sustain historical growth levels, no country could. China is attempting to normalize its economy, albeit in a clumsy manner. Some stocks will be hurt, but not all stocks. The vast majority of stocks will not be hurt if China vanished. But China isn't going away. China has devalued its currency and that's the correct move. It stimulates its economy. It makes Chinese products cheaper. It's a good thing for China. The fact is China's stock market is over bought. It's too expensive and it has been too expensive for a very long time. This is a case of the Chinese stock market meeting reality.

    The other thing to remember is China's stock market isn't its economy. China's economy still appears to be growing but at reduced rates. China isn't a systemic risk to the US or to the world. China has some serious systemic risk of that there is little doubt, but that it's where it begins and ends. Low oil prices are a boom to consumers around the world. The US economy is doing well. The four companies which have reported thus far have all been good. Next week, the earnings seasons begins with Alcoa when Alcoa reports. The World Bank revised global growth estimates this week and raised its growth expectations for the US. So it's not all gloom and doom.

    I think now presents some good buying opportunities for those who have money to invest in stock markets other than China.. But I would stay away from Chinese companies. I have always stayed away from Chinese companies.
     
    Last edited: Jan 7, 2016
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  5. sculptor Valued Senior Member

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    and Walmart, WMT is the only dow stock up this morn(so far)
     
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  7. joepistole Deacon Blues Valued Senior Member

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    The stock market has improved. Futures were down by more than 400 points on the open.

    Companies like Wal-Mart who purchase Chinese production will benefit from China's currency devaluation.

    This isn't the end of the world.

    China has suspended its trading restrictions. So there will likely be a dramatic decline in China's stock market when it opens. But it will eventually find a bottom. Wild swings aren't unusual for China's stock markets.
     
    Last edited: Jan 7, 2016
  8. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    " ...also think about all that debt they hold. they only have a choice of giving it to someone else or hold on to it and collapse their country. debt never, never goes away--it is only moved and increasing(hot potato game) so the question leads to what happens to humanity when that debt, with it's continuous increasing, can no longer be passed. "
    http://www.sciforums.com/threads/th...rically-confirmed.152487/page-55#post-3346314
     
  9. joepistole Deacon Blues Valued Senior Member

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    22,910
    Actually, that debt is China's lifeline. It buys China time to make needed reforms.
     
  10. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    LIM-- uh-huh.. do you not realize that what is occurring over there is what had occurred here in 08?
    they have to do the same thing USA had done--there is no way around-- they have to simply devalue.
    devalue,print money, and move their debt to someone else.
     
  11. joepistole Deacon Blues Valued Senior Member

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    22,910
    No, what is happening in China today isn't what happened to the US.

    China's economy is still growing, but growing less than anticipated. China doesn't have a liquidity problem. China's core problem is its heavy handed government which tries to micromanage its economy.

    You referenced the US debt it holds as part of its currency reserves. China is liquidating those reserves. It needs that money to finance its stimulus. That's why I said the US debt China holds is its lifeline. To me, China is very reminiscent of Japan.

    What China has done is financed its economic growth with debt. Those days are gone. China has the ability to fix its economic troubles. The question is, will it? I think China is on the road to repeat Japan's economic mistakes. Japan was the hot growth story of the 70's and 80's. People don't seem to remember Japan.

    http://www.economist.com/news/finan...tripping-economic-growth-deleveraging-delayed

    Yesterday Soros said there are 2008 similarities, and as much as I admire the man, I have to disagree. This isn't and end of the civilized world as we know it event.

    China does have debt problems, but China's problems are much deeper than debt. The US has a larger total debt to GDP ratio.
     
    Last edited: Jan 7, 2016
  12. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    debt holding and currency reserves are two different things-- but yes they correlate with each other to an extent.. this alone should show you how i am correct. overall, whatever-- believe what you want. also it appears you may not realize this but you are agreeing with me when i stated " devalue,print money, and move their debt to someone else." you just cannot see how i am correct because you do not look further out and possibly lack important knowledge and experience.

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    (shrugs)
     
  13. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    also, were you not the one whom said this " China is known to fudge its economic data and China's lack of transparency makes it difficult to know what is truly going on in China. " ?
    http://www.sciforums.com/threads/th...r-more-worse-news.105212/page-76#post-3346896
     
  14. joepistole Deacon Blues Valued Senior Member

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    I did and I do. That is why I have never nor will I ever purchase a Chinese stock until China makes some very serious changes. In order to understand what is going on in China, I think one needs to pay attention to what companies who are doing business in China have to say about China. Last quarter, companies, for the most part reported numbers in line with expectations. In a few days, reporting season begins anew. So it will be interesting to see what they have to say about China. Last quarter, Apple reported some very good numbers out of China. Let's see if that is still the case. If one wants to know what is happening in China, one needs to listen to the people who do business there.
     
  15. joepistole Deacon Blues Valued Senior Member

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    22,910
    Today, the US reported robust employment numbers for Q4 of last year.
     
  16. joepistole Deacon Blues Valued Senior Member

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    22,910
    I agree with Stiglitz, China is slowing but it isn't the end of the world. It isn't the end of the world. But there is a lot of uncertainty out there. The question is how fast is China slowing. The question is what will the Chinese government do? Thus far they have been really good at bungling. Too much emphasis has been placed on the Chinese stock market. The Chinese stock market isn't really reflective of the Chinese economy largely because of over stimulation by the Chinese government. What's important is the Chinese economy.

    http://www.bloomberg.com/news/artic...-cataclysmic-economic-slow-down-says-stiglitz


    US businesses are robustly hiring people. They wouldn't do that if they were pessimistic about business prospects for the year ahead.
     
  17. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    (LIM) china has been slowing since 2010.
    (shakes head) i find it odd that it is not recognized that these are the same words said right before when USA collapsed in 08.
     
    Last edited: Jan 11, 2016
  18. joepistole Deacon Blues Valued Senior Member

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    22,910
    Here is something to keep in mind, people shouldn't panic. Markets are very vulnerable to macroeconomic events and rumors of macroeconomic events before the onset of earnings season, the period we were in when this selloff began. I hate this period and here is why, companies and folks who are considered "insiders" are prevented from buying stock in their company during this time-frame, to do so would violate insider trading laws. Companies and insiders are prohibited from buying stock in their company or selling their company stock in the 5 week period before they report their earnings. It's called a blackout period. We have just entered earnings season. It will be with us for the next 2 1/2 months. In the coming weeks more and more companies will report and it won't all be the gloom and doom of the last week. In the coming days, we will begin hearing what banks have to report.

    As we progress through earnings season, things will get better as companies and insiders will begin buying their stocks at discounted prices. It's what companies with buy back programs do. Over the coming months, Goldman Sachs expects companies to repurchase more than 600 billion dollars in US stocks. Understandably this confuses novice investors and even some experienced but naive investors. They see their stocks fall in value; they panic; and sell, and then inexplicably prices for those stocks rise. That leads many folks to falsely conclude stock markets are mostly rigged. That's something to think about and something most folks don't know.

    Here is something else to consider, Star Bucks announced today it was going to open 500 new stores in China every year for the next 5 years. They wouldn't do that if they thought business in China was bad or if they thought China's economy was collapsing. Yesterday afternoon, Alcoa announced some very good results. Alcoa is a very commodity driven company. They mine, refine and manufacture aluminum products globally. They are forecasting robust demand for aluminum this year. That's a good thing.
     
  19. exchemist Valued Senior Member

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    What I suspect may be happening may be a very large correction, resulting from the large number of new Chinese investors. The Chinese have a famous appetite for gambling. When they find they are losing we may get more of a stampede than in more mature stock markets.

    But we all need to keep in mind that stock markets always overreact, due to their inbuilt +ve feedback. It may all settle down eventually without catastrophe.
     
  20. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    earnings/earning season has very little too do with some insight to what is occurring in china.
    earning are a result of the institutions income--usually under USA income, even though there are lines on the balance sheet of over seas income-- but that is international--usually separate in general.
    i do not see how earnings tells anyone that china is fine-- if anything earning only tells you that companies from the usa have received their manufactured products from china--nothing more.
    the bottom line is china is in the midst of a recession, no way around it-- including european union-- keep in mind europe is tied to china in deep levels.
    when this occurs in the face of the public and not just behind the scenes as it is now, money will flow to the usa.
    also joe-- i am not trying to be mean to you-- you seem to have some kind of knowledge--but anyways, in your last post there are some things that are incorrect.
     
  21. joepistole Deacon Blues Valued Senior Member

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    22,910
    Oh, and why would that be? The fact is that simply isn't true. The reason why China has garnered so much attention is because of the threat decreased demand in China (i.e. slowing growth) would have on international companies who do business in China.

    I don't think you understand what earning season is, it's more than just reporting earnings. Companies are required to file quarterly financial disclosures to the Security and Exchange Commission. Those disclosures are published and available to the public. Companies are required to disclose all information relevant to their business. They also host conference calls in which they disclose and discuss all information relevant to their business including future plans (e.g. expansion & reduction plans). And if you are doing business in China, the Chinese economy is certainly relevant. The also disclose their forecasts and discuss risks to their forecasts. They discuss their outlooks for their products by country and region.

    That's why earnings season is a good source of information about the countries and regions in which it does business. You should listen in to an Apple conference call. It's much more that just saying we earned x.

    I think you are a little confused. A balance sheet doesn't report income. It reports assets, liabilities, and owner equity. There is a separate financial which discloses income. It's called an income statement. Companies consolidate all business subsidiaries before producing consolidated financials for the business. But that doesn't mean foreign subsidiaries are overlooked and not discussed. If they are material to the company's performance they are disclosed and discussed. Like I said, I suggest you listen to Apple's earnings report.

    Well that depends on your definition of recession and if you believe China's official disclosures. There isn't a consistent definition of recession. But there is general agreement demand in China is slowing. But not for everything. As previously mentioned Starbucks Coffee plans to open 500 new stores a year in China for the next 5 years. As I have written for years now, China has some very big problems. But it also has time, and it has the ability and desire to fix what ills its economy.

    I'm not sure what that means. I think anyone who is interested knows China has problems. Money will flow to the US regardless. Money has been flowing tot he US for a very long time. The US Dollar is the world reserve currency. Times of international unrest strengthen the US Dollar. When US interest rates rise as they have, it strengthens the US Dollar. Money flows from all developing countries like China to the US when interest rates rise. That has nothing to do with a recession in China. A recession in China makes Chinese goods cheaper. It would have the exact opposite effect. It would drive money into China because it would buy more goods and services.

    If investors lost confidence in China's government, that on the other hand would cause investment to flea the country by the boat load. Investors would flea the country. That's the real danger here and that fact is not lost on the Chinese government.

    Based on the information currently available, I'd say conditions are not as bad as some folks believe and not as good as some folks have believed. China isn't catastrophic, but it isn't nirvana either and I think the impact of China's slowing economy on the world economy is a bit overstated. The US economy is growing, Europe is growing. That's about half the world's economy. China only represents about 13% of the world economy.

    Oh, and what would those thinks be?
    .
     
    Last edited: Jan 13, 2016
  22. krash661 [MK6] transitioning scifi to reality Valued Senior Member

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    hilarious-- i hold a series 7, i used to be an goldman sachs associate until i decided too trade my own money on my own time-- other than that--whatever.

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    (shakes head)
     
  23. joepistole Deacon Blues Valued Senior Member

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    Well if that were so, then you should know the difference between a balance sheet and an income statement.

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