Don't believe the hype

Hello everyone.
Just a very quick post on the collapse in the Chinese stock market, and how it's being (mis)reported by mainstream media in China and in the West.
I'll assume all readers know that the Chinese stock market bubble has burst, and that the bursting is ongoing, with many stocks limit down today.
Reports in the media have all been saying the same things, which can be summarised as follows:
1. The Chinese government are doing all they can to stop the collapse.
2.The People's Bank of China is supporting the market, buying shares, helping brokers, and will do anything to keep it all propped up.
3. Interest rates are being slashed again to try to keep the bubble afloat.
4. Eventually, the Chinese will socialise the stock market and maybe the housing market.

Here are a few links of stories doing the rounds this week:
www.zerohedge.com/news/2015-07-07/china-futures-plunge-8-over-half-stocks-suspended-margin-debt-crashes-most-record
www.bloomberg.com/news/articles/2015-07-05/china-brokers-dust-off-wall-street-s-playbook-from-crash-of-1929
(The opening line from the Bloomberg presenter in the video: 'What can the government do here to restore confidence'). Help us dear government, please don't let your people suffer, make things nice and fluffy again. That's the world we live in folks.
www.fortune.com/2015/07/04/china-to-buy-stocks-to-prop-shaky-market/
www.reuters.com/article/2015/07/04/us-china-markets-brokerage-pledge-idUSKCN0PE08E20150704
A few interesting quotes from that last link: 'China froze share offers and set up a market-stabilization fund on Saturday, the Wall Street Journal said, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world's second-largest economy. Beijing's reported suspension of initial public offers (IPOs) came a few hours after extraordinary announcements by major brokers and fund managers, which collectively pledged to invest at least $19 billion of their own money into stocks. China's government, regulators and financial institutions are now waging a concerted campaign to prop up the nation's two main share markets, amid fears that a meltdown would rock the financial system and inflict heavy losses across an economy where annual growth is already running at a 24-year low.'
$19 billion! A huge sum of money. But did you know that this figure represents less than 0.4% of the market capitalisation of the Chinese stock markets? You probably didn't, because the media didn't mention that, as it would ruin the narrative for you. The suspension of IPOs, is 'reported' you will note. I can imagine there were dozens of companies looking to launch IPOs these past 2 weeks into this crashing market, so a good job the government suspended them, reportedly. It's a good line though, many will believe it. I don't.
Here's a link to the People's Bank of China's website:
www.pbc.gov.cn/publish/english/963/index.html
Here's a link to the China Securities Regulatory Commission website:
www.csrc.gov.cn/pub/csrc_en/
Why not spend a fun half an hour trying to find ANY official press release or other information on the huge efforts being made by these two organisations to prop up the markets. Good luck in your search. Please do let me know if you find anything though.
All that I found on the PBC website was this announcement regarding targeted interest rate cuts:
www.pbc.gov.cn/publish/english/955/2015/20150629150104268488848/20150629150104268488848_.html
Here's what they announced:
'The PBC has decided to provide targeted reserve requirement ratio (RRR) cuts for selected financial institutions as of June 28, 2015, in an effort to step up support for the development of the real economy and promote structural adjustment. First, the RRR will be lowered by 0.5 percentage points for city commercial banks and non-county-level rural commercial banks that have reached the targeted RRR reduction standard in terms of the share of loans to the agricultural sector, rural areas and farmers in total lending. Second, a reduction of 0.5 percentage points will be applied to the RRR of large state-owned commercial banks, joint-stock commercial banks and foreign-funded banks that have reached the targeted RRR reduction standards in lending to the agricultural sector, rural areas and farmers, or to micro and small enterprises. Third, the RRR will be reduced by 3 percentage points for finance companies to further motivate them to do their part in increasing the fund use efficiency of enterprises.
At the same time, to further reduce financing costs for enterprises, the PBC has decided to cut RMB benchmark loan and deposit interest rates for financial institutions as of June 28, 2015. The one-year benchmark loan interest rate and deposit interest rate will both be lowered by 0.25 percentage points, to 4.85 percent and 2 percent, respectively. Adjustments are made correspondingly to benchmark interest rates on deposits and loans of other maturities, and to deposit and loan interest rates on personal housing provident fund.'
Everything is being aimed at the real economy, and it's crystal clear that China knows that the real economy is what matters. They may make various media announcements about the stock market to steer the narrative for the masses (your government does care about your stupid investments going down the tubes and we are really doing all we can to help you, but sadly it doesn't seem to be working, oh well, shit happens folks).
So, narratives, it's all about narratives. But the truth is that China are more focused on the real economy than the US, UK and many other developed countries, which remain beholden to the financial sector of the economy. China are slowly but surely becoming a major player in an ordo-liberal world, along with the Eurozone.
So, be careful what you read and think, because the mainstream media, as well as the likes of Zero Hedge, all have their own biases and agendas, and want to control your thoughts.
Edit 12th July 2015:
More narratives for you
From that article:
'The latest warning by the China Securities Regulatory Commission (CSRC) is meant to clamp down on a trick whereby a single investor controls multiple accounts -- often registered under other people's identification numbers -- to bid the price of a stock up or down.'
It's rather obvious that banning multiple trading accounts is not a measure designed to reflate the stock market bubble, rather the opposite. But the narrative remains steadfast, that 'China' wants to blow the bubble up again. Think for yourselves.

11 comments:

Warren James said...

Agree. These days I've been using these effects to my advantage - I will typically check news.com.au not for news, but to check the pulse on what the puppet masters / moneyed interests desire the general public to believe/think for that day. It's very reliable.

Likewise, twitter is great to guage whether any campaigns are currently running to bolster Russia's image, promote fear over ISIS or stir up selective ethnic (or anti-religion) hatred using basic psychology/images. I don't read ZH any more but the articles I do see are great contrarian indicators (ZH tweet on bloomberg tv a great example).

I am rather reminded of a science fiction short story (forgot the author, sorry) about a world whose economy was managed by the illusion of interstellar war - every time he had savings built up there would be a 'new threat' develop and he would be motivated to spend - the populace was just 'managed' through news and it was easy to control because it was all 'offworld'. I don't think we're too far off that reality now, sadly. Its hard to know what the reality is these days because all the streams have been muddied beyond recognition.

(in the story, when the guy finally visited the front he found there was no actual war going on)

--Warren

Gary said...

Absolutely Warren, the truth is impossible to know, as nearly everything is BS. We have to rely on our common sense and (for me) use history as a guide.
Today, news is that China is threatening short-sellers with arrest, but once again, it's just a little comfort for the masses, government giving the impression of doing something. The media love it.
The narratives are also changing to suggest that those in control are not actually in control, pertaining to China, the Fed, and the Troika. Mass neurosis lies ahead, all bets will be off soon.

sTaCkeR said...

(Another) weird article.

1. Who on earth would think that the gov't would post a press release of the nature suggested in the post?

2. According to many sources, but here's one, Xinhua News Agency tweeted that the 2nd in charge of Public Security Bureau said they'll monitor and punish those who spread malicious rumors in order to profit from short selling
http://news.sina.com.hk/news/20150709/-32-3890065/1.html
While it doesn't say they're banning short selling, they are surely "discouraging" it.

3. "$19 billion! A huge sum of money. But did you know that this figure represents less than 0.4% of the market capitalisation of the Chinese stock markets? You probably didn't, because the media didn't mention that"

That's total BS, both the Bloomberg article and ZH specifically mentioned a quote in which someone said that $19bn won't last an hour.

---


Honestly I don't even understand what are you trying to say because (point 3 above) you provide the same arguments/info as ZH and Bloomberg which you criticize, and at the same time claim they spread rumors. Truly bizarre.

P.S. Screw the stupid image captcha.

Gary said...

Hello stacker.

A fair point re the $19b in that article, although the Bloomberg writer was more equivocal, and there are plenty of other articles that didn't mention this fact.

As for the other points, the government is doing virtually nothing, just making noises to create a narrative, and ironically, your quoting the '2nd in charge at the Public Security Bureau' demonstrates their narrative is holding firm.

If they wanted to, China could discreetly stop the crash, by buying enough shares. But it won't. There's your truth.

sTaCkeR said...

Hi Gary

Sorry about the harsh tone in earlier comment (it wasn't deserved in this post alone, but I've had some carry over from previous posts in recent months to which I did not comment ;-)).

Just watched financial news (in Asia) and saw about another measure in China which bans shareholders who hold more than a 5% share in listed companies from selling in the next 6 months.

What the gov't is doing in China is ridiculous even though we know it's a controlled economy.
Why they pull this or that lever (or why not all at once), we can't know.
Your or my guess is not any better than Tyler's or Bloomie's.
The Communist Party of China isn't a monolithic organization, so after everyone's interests are considered it's not unusual to see what may seem like weak measures. Maybe they got caught off guard, maybe those (party members) with access to cheap money are deliberately creating rumors to buy stocks on the cheap, maybe the gov't is offloading state owned stocks onto retail investors.

To buy hundreds of millions, erh, billions of US$ worth of stocks - that is possible, but it would be like doing a just-in-time QE for the rich. A highly risky move... Maybe they'll do it if the markets keep crashing to the point where the system gets shakey, but not just yet.

I read ZH as well as mainstream media and I strongly disagree that ZH should be singled out. Of course there's a lot of gloating (as there should be, considering everything) and biased interpretations of news, but there are no outright lies that permeate the lamestream media. A typical example from a EU media from 1-2 days ago: "the Swiss frank opened very high, but then it quickly returned to a stable level". Really? I wonder how did that happen??

Cheers
sTaCKer

Gary said...

That's OK stacker, my STFU friends warned me to have a thick skin!

Many matters where we'll have to agree to disagree it seems.
I really don't think China is worried about the super-rich, more about the masses becoming restless. As for Zero Hedge, it was once an honest blog, but no longer. Agendas galore.
Best wishes.

Ryan M said...

Could you please update your $tnx:$silver chart with detailed views (zoomed in daily snapshots) of previous times when the ratio has hit the top of the wedge? I'd like to try and estimate an average time to the subsequent bottom in the gold price and/or silver price.

Gary said...

A classic here:

http://www.bloomberg.com/news/articles/2015-07-17/china-securities-finance-said-to-have-up-to-483-billion-on-tap

And yet the bubble will burst. But the Chinese govt will appear to have done all it can. Brilliant.

John Corbit said...

We are at 1081. What does $TNX:$Silver look like today, two months after your post?

Gary said...

As I type the Chinese stock market is down 8% on the day.
The best evidence that the hype was just that.
The Chinese are allowing their bubbles to deflate, whilst making it appear that they are in control and care about the losses being suffered by stock bubble gamblers.
The opposite is true.
Let's see if the Fed and other central banks are so pragmatic.

Gary said...

Chinese markets down another 7.5% today?
Suddenly ALL of the hype has dried up.
Rinse & repeat, next up: same story re the Fed, BoJ, BoE et al.
Don't believe any of it, markets rule.