Chinese stock market crash; has the bubble finally burst?

[Admiral Yi]

Isn't that the Japanese approach?

AFAIK Japan didn't do anything to prop up their bubble.

[Caliga]

 

[DontSayBanana]

Doesn't Shanghai have a trade-curbing mechanism?  NYSE would curb trading for 15 minutes at 7%...

[celedhring]

http://www.finviz.com/futures.ashx

End of times! (again)

[jimmy olsen]

Down another 3.97% so far today.

[Monoriu]

In recent months, the Shanghai index hovered between 3,500 and 4,000.  3,500 points was considered the floor that the central government would tolerate.  They'd buy if the index approaches it.  What triggered the latest panic is that the index fell decisively below 3,500.  It is now trading at around 3,100.  That means either Beijing has abandoned the 3,500 floor, or it has run out of ammunition. 

[Tonitrus]

Maybe they're giving it a few days/weeks to see if it will bounce back first?

[DGuller]

In recent months, the Shanghai index hovered between 3,500 and 4,000.  3,500 points was considered the floor that the central government would tolerate.  They'd buy if the index approaches it.  What triggered the latest panic is that the index fell deciseively below 3,500.  It is now trading at around 3,100.  That means either Beijing has abandoned the 3,500 floor, or it has run out of ammunition.

Which is the classic danger of government pegs.  You either succeed or fail catastrophically.

[Monoriu]

Maybe they're giving it a few days/weeks to see if it will bounce back first?

The problem is that nobody knows what the Politburo is thinking about.  So everybody is speculating based on limited information available.  The market used to believe that the Shanghai index would not fall below 3,500, because every time it looked like it would happen, the state-owned companies went in to buy everything they could.  That changed last week.  There is no official communication on what happened, so the market has to reach its own conclusions.  So far, the conclusion seems to be that Beijing can no longer prop up the market, for whatever reason. 

[DGuller]

Maybe they're giving it a few days/weeks to see if it will bounce back first?

The problem is that nobody knows what the Politburo is thinking about.  So everybody is speculating based on limited information available.  The market used to believe that the Shanghai index would not fall below 3,500, because every time it looked like it would happen, the state-owned companies went in to buy everything they could.  That changed last week.  There is no official communication on what happened, so the market has to reach its own conclusions.  So far, the conclusion seems to be that Beijing can no longer prop up the market, for whatever reason.

This reminds me of Railroad Tycoon 3, when I'm badly over-leveraged just before recession hits, and am desperately trying to stay one month ahead of margin calls.  My company needs the cash as the operating profits plummet, but I need to keep the share price propped up with share buybacks or it won't be my company anymore.  More often than not the end result is having $-2,000,000 in cash and 0 stocks. 

[Monoriu]

It is likely that Beijing will continue to support the market at least for a while.  3 September 2015 is the 70th anniversary of China's WWII victory against Japan, and there will be a huge military parade in Beijing.  It is billed as an important political event for the current generation of Chinese leadership, so it is unlikely that we will hear any bad news in the coming week.  Or so they say 

[Tonitrus]

It is likely that Beijing will continue to support the market at least for a while.  3 September 2015 is the 70th anniversary of China's WWII victory against Japan, and there will be a huge military parade in Beijing.  It is billed as an important political event for the current generation of Chinese leadership, so it is unlikely that we will hear any bad news in the coming week.  Or so they say 

Shouldn't the KMT be celebrating that, not the CPC? 

[Monoriu]

It is likely that Beijing will continue to support the market at least for a while.  3 September 2015 is the 70th anniversary of China's WWII victory against Japan, and there will be a huge military parade in Beijing.  It is billed as an important political event for the current generation of Chinese leadership, so it is unlikely that we will hear any bad news in the coming week.  Or so they say 

Shouldn't the KMT be celebrating that, not the CPC? 

History, as they say, is written by the victors 

[jimmy olsen]

The Chinese slowdown is leading to a further fall in oil prices, one that will be exacerbated if the Iran sanctions are lifted as expected. Excellent!

http://www.nytimes.com/2015/08/25/world/from-venezuela-to-iraq-to-russia-oil-price-drops-raise-fears-of-unrest.html

[Tonitrus]

Still probably going to stay over $3/gallon here in AK.