Watch out Greece, it's the threat from the East: China, they say

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Watch out Greece, it's the threat from the East: China, they say Anonymous 07/07/15 (Tue) 00:08:49 No.1249

Greek crisis is nothing compared to China

http://money.cnn.com/2015/07/06/investing/stocks-market-china-greece/index.html?iid=hp-stack-dom

Instead of focusing on Athens, investors should be much more worried about what's going on in China. You know, that country with about 1.4 billion people and the world's second largest GDP? The Shanghai Composite and Shenzhen Composite have both plunged about 30% from their highs due to legitimate concerns that Chinese stocks are in a bubble. China's government is taking steps to try and minimize any more pain in the market. But that could backfire. Regulators announced Sunday that they would make more capital available for an entity that will allow for even more margin lending, the practice of borrowing money to buy stocks. Buying on margin is incredibly risky.

Many experts believe the Chinese stock market's surge earlier this year was partly due to average investors taking on debt to invest in stocks. And when stocks first started to fall last month, many of those investors had to quickly sell their investments to pay back the loans. That fueled an even bigger drop in stock prices. It could get worse as investors realize that the slowdown in China's economy should hurt corporate profits.

"Exuberance for Chinese stocks isn't backed up by fundamentals," said Michael Pento, president and founder of Pento Portfolio Strategies, in a report Monday morning. "Instead, it appears markets are being levitated by continued government borrowings and manipulations."

Stephen: Why Beijing cannot let its bull market die

http://www.marketwatch.com/story/why-beijing-cannot-let-its-bull-market-die-2015-07-05?link=MW_popular

But perhaps there is a simpler explanation for Beijing’s extraordinary efforts to support equities: It created this bull market. Keeping it going is now seen as a test of the Communist Party’s strength, and possibly even its legitimacy. If you created the boom, arguably that also puts you on the hook for the bust. For the government, this means the fallout will not just be economic, but could also be political and social too.

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Anonymous 07/07/15 (Tue) 00:09:18 No.1250

China's big, misguided stock market gamble

http://fortune.com/2015/07/06/china-stock-market/

…There are, however, two less charitable explanations for China’s latest moves. First, Chinese leaders tend to view economic issues from a purely political perspective. Unsurprisingly, the performance of the stock market has been made a barometer of the popularity of the current regime. The head of China Security Regulatory Commission not too long ago called the soaring market “a reform bull market,” suggesting that investors were giving a vote of confidence in the leadership’s promised reform programs. A plunging market would imply a loss of confidence and falling popularity of the current leadership—an intolerable prospect.

Second, those who have watched how China deals with bubbles know that its leaders have little faith in market forces but excessive confidence in their ability to sustain bubbles.

We can see this mindset at work in China’s management of two recent bubbles: the real estate market and local government debt. In addressing the real estate market bubble, Beijing has opted to keep insolvent developers alive by forcing their lenders to roll over the loans. Consequently, the glut of unsold inventory hangs over the real estate sector. Because there is such an excess in the supply of housing, it is unlikely that those zombie real estate developers will return to life and pay their creditors in full. Beijing has used a similar recipe for shoring up its debt-laden local governments. After the bond market rejected Beijing’s plan to float the debt issued by local governments earlier this year, Chinese leaders simply ordered state-owned banks to buy such debt, adding assets of dubious quality to their balance sheet.