Pending Financial Crisis?

[Play by Numbers]

The current crisis in Greece has the ability to create a domino effect which spreads to other nations in the Euro-zone, though this is more likely to be a political contagion of choice, rejection of austerity rather than financial crisis.

China though is potentially facing a severe market crash and a concerning no. of companies have suspended trading:

http://www.telegraph.co.uk/finance/...-crisis-is-happening-in-China-not-Greece.html

While all Western eyes remain firmly focused on Greece, a potentially much more significant financial crisis is developing on the other side of world. In some quarters, it’s already being called China’s 1929 – the year of the most infamous stock market crash in history and the start of the economic catastrophe of the Great Depression.

In any normal summer, a 30pc fall in the Chinese stock market – a loss of value roughly equivalent to the UK’s entire economic output last year – after an ascent which had seen share prices more than double within the space of a year would have been front page news across the globe.

The dramatic series of government interventions to stem the panic – hitherto unsuccessful, it should be added – would similarly have been up there at the top of the news agenda. Yet the pantomime of the Greek debt talks, together with the tragi-comedy of will they, won’t they leave the euro, has relegated the story to little more than a footnote - even though 940 companies, more than a third, have now suspended trading on China’s two main indices.

http://www.telegraph.co.uk/finance/...-crisis-is-happening-in-China-not-Greece.html

Breaking news is now that the NYSE has suspended all trading due to a technical issue. This seems largely unrelated, though the coincidence is alarming.

It is worth considering though with current fears of a market collapse in China and deep troubles in the Euro-zone presented by a Greek exit, or unwillingness of government to honor a bailout package, what harm a cyber attack or inopportune freeze on the NYSE could have if it again happens during a sino crisis.

The alternative take may be that Greece agrees to a compromise, this is a natural market correction for China which does not pose any systemic risk to the wider economy or global markets and there is nothing suspicious about the glitch, instead it is a soon to be shrugged off technical problem.

Read here for a less concerned take on the China situation.

http://www.washingtonpost.com/poste...the-politics-of-chinas-stock-market-collapse/

Personally, my main concern is the knock on effect aggressive attempts at market regulation will have on he wider economy. Social unrest, halting of market liberalisation which would further dent growth, capital allocation away from areas that are already unstable, like infrastructure and housing, which drive the construction industry and the creation of an unsustainable quasi casino stock market.

Panic over China does not yet seem to be spreading, but global financial markets may be in for a bumpy week or more.

 

[Exe Gesis]

A China crash would be the best thing for the world

 

[Lebbo73]

The current crisis in Greece has the ability to create a domino effect which spreads to other nations in the Euro-zone, though this is more likely to be a political contagion of choice, rejection of austerity rather than financial crisis.

China though is potentially facing a severe market crash and a concerning no. of companies have suspended trading:

http://www.telegraph.co.uk/finance/...-crisis-is-happening-in-China-not-Greece.html



http://www.telegraph.co.uk/finance/...-crisis-is-happening-in-China-not-Greece.html

Breaking news is now that the NYSE has suspended all trading due to a technical issue. This seems largely unrelated, though the coincidence is alarming.

It is worth considering though with current fears of a market collapse in China and deep troubles in the Euro-zone presented by a Greek exit, or unwillingness of government to honor a bailout package, what harm a cyber attack or inopportune freeze on the NYSE could have if it again happens during a sino crisis.

The alternative take may be that Greece agrees to a compromise, this is a natural market correction for China which does not pose any systemic risk to the wider economy or global markets and there is nothing suspicious about the glitch, instead it is a soon to be shrugged off technical problem.

Read here for a less concerned take on the China situation.

http://www.washingtonpost.com/poste...the-politics-of-chinas-stock-market-collapse/

Personally, my main concern is the knock on effect aggressive attempts at market regulation will have on he wider economy. Social unrest, halting of market liberalisation which would further dent growth, capital allocation away from areas that are already unstable, like infrastructure and housing, which drive the construction industry and the creation of an unsustainable quasi casino stock market.

Panic over China does not yet seem to be spreading, but global financial markets may be in for a bumpy week or more.

The CT's always said a market or bank crash would be forewarned by bank closures and/or stock exchange technical difficulties. Could this be the big economic crisis that causes the current global currency system to fail? Not yet in my opinion. We are close though!

 

[Jiska]

Personally, my main concern is the knock on effect aggressive attempts at market regulation will have on he wider economy. Social unrest, halting of market liberalisation which would further dent growth, capital allocation away from areas that are already unstable, like infrastructure and housing, which drive the construction industry and the creation of an unsustainable quasi casino stock market.

Panic over China does not yet seem to be spreading, but global financial markets may be in for a bumpy week or more.

FWIW the Greek economy (0.3%) is smaller than the Victorian economy (0.4%) in terms of GDP value. What we've seen recently are knee jerk reactions. There is no pending financial crisis on the back of Greece; it's merely a media beatup. Greece has next to no effect on the global stage; China is of a much greater concern.

 

[Jiska]

A China crash would be the best thing for the world

Not sure how you figure that, given they own a substantial proportion of US Government bonds. China is arguably the most important economy for the world.

 

[Exe Gesis]

Not sure how you figure that, given they own a substantial proportion of US Government bonds. China is arguably the most important economy for the world.

Exactly why.

 

[Lester Burnham]

Breaking news is now that the NYSE has suspended all trading due to a technical issue. This seems largely unrelated, though the coincidence is alarming.

NYSE is denying that it was due to a cyber attack but on other markets cyber security stocks surged.

http://www.bloomberg.com/news/artic...rged-on-the-back-of-the-big-nyse-trading-halt

Yesterday also saw United Airlines ground their fleet for the second time in a month. It could be that hackers uploaded bogus flight plans as happened to the Polish State airline.

http://www.wired.com/2015/06/airlines-security-hole-grounded-polish-planes/

The Wall Street Journal website also crashed for a while, but that could have been due to increased traffic from NYSE being down.

 

[szhengd]

Actually, China is the really important one here, as the crash is reflective of much deeper systemic economic problems in the Chinese economy.
With much of the world exposed to China in one form or another, the collapse in China and it's knock on effects are far scarier than what Greece has to offer

 

[Play by Numbers]

FWIW the Greek economy (0.3%) is smaller than the Victorian economy (0.4%) in terms of GDP value. What we've seen recently are knee jerk reactions. There is no pending financial crisis on the back of Greece; it's merely a media beatup. Greece has next to no effect on the global stage; China is of a much greater concern.

Which is my point.

85% of Chinese stocks are owned and traded by mom and pop investors. This makes the situation even more worrying as these are mostly middle class and account for huge amounts of spending and growth globally.

We are talking billions in overseas education, 10's of billions in luxury goods and tourism and hundreds of billions in real estate.

Capital flight away from Aus property markets, as liquidity strapped investors desperately seek cash could be devestating, likewise the huge dip in tourism for countries like Thailand or retail sales in a country like France.

 

[knife]

China have absolutely enormous levels of malinvestment throughout their economy and the longer they wait to address it, the worse the outcome will be. At some point people and companies are going to have to face reality and book losses instead of continually being bailed out with some bullshit stimulus.
The most effective teacher is failure and too many in China haven't experienced it, especially in investment.

 

[szhengd]

[QUOTE="Play by Numbers, post: 39514795, member: 51280"

85% of Chinese stocks are owned and traded by mom and pop investors. This makes the situation even more worrying as these are mostly middle class and account for huge amounts of spending and growth globally.[/QUOTE]


15% of investors doing so on margin ( average in other markets is 2-3%) Main assets used are property and other stocks.
Majority of SME listed companies using their stock price as collateral for cheap loans. Banks have just been ordered today to extend this.
50% of stocks currently suspended. Broking companies ordered to spend at least CNY150 mill on own products and ETF's and to not sell.
Major shareholders forbidden from selling for 6 months

What could go wrong?

 

[Play by Numbers]

85% of Chinese stocks are owned and traded by mom and pop investors. This makes the situation even more worrying as these are mostly middle class and account for huge amounts of spending and growth globally.

15% of investors doing so on margin ( average in other markets is 2-3%) Main assets used are property and other stocks.
Majority of SME listed companies using their stock price as collateral for cheap loans. Banks have just been ordered today to extend this.
50% of stocks currently suspended. Broking companies ordered to spend at least CNY150 mill on own products and ETF's and to not sell.
Major shareholders forbidden from selling for 6 months

What could go wrong?

Its nuts, you cant rig a market like this and not have huge roll on effects in the future.

For A list stocks, investors will see this as a sign the market is rigged in favor of the house. Big investors especially are being penalised and the blowback on foreign investors, who account for a minor percenrage of the market and are highly restricted, will hamper future attempts to lure foreign capital necessary for market liberalisation.

The degree of interference is crazy and dangerous. What began as a large problem for investors ridks hurting the real economy because of the level of government action

 

[szhengd]

General feeling is that the government will bail them out, as per previous crashes, however I'm not sure the government has the cash to do that.
Once the banks call in the stock price collateral loans, they will be in possession of basically worthless companies, compounding their bad loan problems.

Already very strong rumours that PBOC bailed out China Merchants earlier this year

 

[Xsess]

Would be nice if we didn't have to approach this global uncertainly with record debt. But yes yes debt is good..

 

[Play by Numbers]

Would be nice if we didn't have to approach this global uncertainly with record debt. But yes yes debt is good..

Debt is the last of our worries.

Commodities markets, slowing Chinese investment outside of property, falling stock prices and the property bubble are all more worrying.

 

[Footypie32]

So did the market recover?

 

[Play by Numbers]

So did the market recover?

Nope. Finished with a slight gain after early falls.

This is typical of a secular bear market. Short sharp rallies, but even when large gains were made it failed to reach record highs on steady gains.

Likely that the correction will be protracted and happen in earnest over the next month.

I read one analyst saying 85-90% off recent gains within the next year.

Government intervention has just made it worse as long term, people will swear off the main indices, as they are rigged. Why they continued to tumble as losses to share prices slowed. Worse still are all the companies with meaningless valuations, being propped up by government buyouts, whose stock will fall through the floor once the intervention eases.

That's like a double wack in lost capital.

 

[not a warmonger]

Capita

Nope. Finished with a slight gain after early falls.

This is typical of a secular bear market. Short sharp rallies, but even when large gains were made it failed to reach record highs on steady gains.

Likely that the correction will be protracted and happen in earnest over the next month.

I read one analyst saying 85-90% off recent gains within the next year.

Government intervention has just made it worse as long term, people will swear off the main indices, as they are rigged. Why they continued to tumble as losses to share prices slowed. Worse still are all the companies with meaningless valuations, being propped up by government buyouts, whose stock will fall through the floor once the intervention eases.

That's like a double wack in lost capital.

Capitalism on its knees?

 

[Maggie5]

Do not worry, this government has the China crises in hand, they are taking preventative actions.

I might be mistaken but I thought that these "actions" were taking place before?

http://www.theaustralian.com.au/nat...ays-julie-bishop/story-fn59niix-1227436496602

The Abbott government is taking “preventative action” in anticipation of a “downturn” across vulnerable sectors of the economy caused by tumbling Chinese stocks and plummeting iron ore prices, Julie Bishop says.

The Foreign Minister today described China as a “large and resilient economy” and expressed confidence that officials in Beijing were attempting a “seamless” correction in its financial markets.

Ms Bishop said the lower price of iron ore — which this week dropped to $US44 a tonne — “does present challenges for us, of course”.

“Forecasting is based on assumptions and when those assumptions change you have to reassess the situation. That’s why we’re so focused on diversifying our economy,” Ms Bishop told ABC Radio.

“My colleague Andrew Robb is pursuing free trade agreements — not just with China and Japan and South Korea but also with India. We are also negotiating what’s called the Trans Pacific Partnership, 12 countries, so that we can diversify our global trade.

“That kind of preventative action I think will stand us in good stead should there be a downturn in particular sectors of our economy, other aspects of our economy can rally.

“I’m confident that the Chinese will do all they can to take appropriate steps to ensure that whatever correction takes place in their stock market, their stock exchange, it takes place in an orderly fashion.

“China has been through the Asian financial crisis in the past and I’m sure they’ll adopt whatever measures they can to make this a seamless transition.”

 

[Play by Numbers]

Do not worry, this government has the China crises in hand, they are taking preventative actions.

I might be mistaken but I thought that these "actions" were taking place before?

http://www.theaustralian.com.au/nat...ays-julie-bishop/story-fn59niix-1227436496602

The Abbott government is taking “preventative action” in anticipation of a “downturn” across vulnerable sectors of the economy caused by tumbling Chinese stocks and plummeting iron ore prices, Julie Bishop says.

The Foreign Minister today described China as a “large and resilient economy” and expressed confidence that officials in Beijing were attempting a “seamless” correction in its financial markets.

Ms Bishop said the lower price of iron ore — which this week dropped to $US44 a tonne — “does present challenges for us, of course”.

“Forecasting is based on assumptions and when those assumptions change you have to reassess the situation. That’s why we’re so focused on diversifying our economy,” Ms Bishop told ABC Radio.

“My colleague Andrew Robb is pursuing free trade agreements — not just with China and Japan and South Korea but also with India. We are also negotiating what’s called the Trans Pacific Partnership, 12 countries, so that we can diversify our global trade.

“That kind of preventative action I think will stand us in good stead should there be a downturn in particular sectors of our economy, other aspects of our economy can rally.

“I’m confident that the Chinese will do all they can to take appropriate steps to ensure that whatever correction takes place in their stock market, their stock exchange, it takes place in an orderly fashion.

“China has been through the Asian financial crisis in the past and I’m sure they’ll adopt whatever measures they can to make this a seamless transition.”

Gee they are dispicable.

 

[Seeds]

Capita

Capitalism on its knees?

Yes capitalism is on its knees because two communist countries in China and Greece are struggling (rolls eyes)

 

[Seeds]

China crisis is being completely overplayed. It's just a correction from a ridiculous 6 month bull run. Market is still way up on last year. No crisis here.

 

[Play by Numbers]

Yes capitalism is on its knees because two communist countries in China and Greece are struggling (rolls eyes)

Capitalism is not on it's knees but neither Greece nor China are communist countries.

Greece is a democracy, but borderline oligarchy. China is a mature fascist nation and long ago abandoned a Maoist communist style government..

 

[Play by Numbers]

China crisis is being completely overplayed. It's just a correction from a ridiculous 6 month bull run. Market is still way up on last year. No crisis here.

You are wrong.

The market controls and interference by the gov, will have long term consequences and are almost guaranteed to precede a crisis.

 

[Seeds]

Capitalism is not on it's knees but neither Greece nor China are communist countries.

Greece is a democracy, but borderline oligarchy. China is a mature fascist nation and long ago abandoned a Maoist communist style government..

In terms of capitalist rankings they are well down the list. Which is kind of the point.