Chinese stock plunge leaves investors scouring state media for clues | Hacker News Reader

Chinese stock plunge leaves investors scouring state media for clues

bloomberg.com

97 pointsadventured64 comments

From the article, a small investor: "China’s stock market is really different from other countries"

It's different this time. I'm sure I've heard that before.

Anyway, something tangential but a little bit interesting; it seems that an accountant quoted in this story, "Yao Lina", sold all her holding in February 2012: http://s-aint.com/store/files/Bloomberg_Business_News_Headli...

And also in November 2013: http://www.bloomberg.com/news/articles/2014-01-21/china-ipos...

And June 2015 in this article.

All Bloomberg origin, as far as I can tell.

Sure, maybe she really does binge on cycles of all in and all out, but it seems odd nonetheless. If I had to guess, if she does exist, she's a reliable source for journos who need an "ordinary chinese citizen" to tell them she's bailed out completely, and give them a good quote, always on the same theme:

“I have no confidence in the stock market,”

“I thought the market was going nuts and someone was coming to manipulate the market... I have no confidence in the market because there are lots of speculators playing in it.”

...the government may take as long as five years to fix “structural” challenges in the economy that have curbed growth.

This most recent article contains an odd change of tone, though. She's still bailed out (so she says, again), but also “China’s stock market is really different from other countries. The government surely has some measures to control the movement.” I'm sure I've heard that before; people sure that the magical government can somehow stop a market crash.

It would be interesting to work out how well her quoted comments match the official PRC government line (and unofficial government line) at the time; if she exists, is she a government mouthpiece, or just someone the journos know is always good for a negative quote about the Chinese market, from the small investor? I wouldn't be surprised if all these Bloomberg journos ever saw of her was a controlled press release of suitable comments and sources from China, for them to mine from to make their story.

It's not surprising at all. There have been reports of construction companies rebranding themselves as tech companies and doing a public offerings at P/E ratios that would make the hucksters of Silicon Valley circa 1999 blush. It will be interesting to see how it affects the rest of the world. That's the unpredictable part.

How exposed to China is the rest of the world? If it's not a lot then it kind of doesn't matter as much.

Would love to learn more about that, got a link?

There you go. http://www.economist.com/news/finance-and-economics/21652337...

It seems to me that construction workers should have an excellent understanding of pivots.

+1 clever!

Look at a 5 year chart. The SSE was simply over-bought. Any trader would tell you that.

Now why was it over-bought? Part of the reason is because of the Shanghai-Hong Kong market link, which drove massive amounts of volume into Shanghai, and traders took advantage by taking on large margin accounts. When the savvy traders started booking profits, the rest were left to try cover their positions.

The Hang-Seng (Hong Kong) dropped too, but by far less because it was priced much better.

Anyhow, this has nothing to do with the Chinese economy, or even stock fundamentals. It's just that equity prices were driven up too high by traders.

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r...

https://ca.finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;...

The Chinese economy isn't doing that great right now, so people were puzzling over the stock market boom. But as you say, these two things are almost completely separated at this point.

Now if someone could tell me where to park my RMB savings...real estate? Stock market? Under my mattress? The real problem is that investment opportunities in China really aren't that great.

It's not just China with a shortage of great investment opportunities, it's ~everywhere.

China is especially bad. At least you have decent indexed funds in the states, or you could even buy some real estate that wasn't incredibly bubbly (even at the height of the housing bubble, the US was nowhere near 40% occupancy in a tier one city).

If I ever move back, I'm buying a car and a house...and I'm doing the max contribution on my 401k for as long as possible.

Easy opportunities aren't. By easy: click a switch and send money somewhere.

But financing is huge. A lot of people and businesses don't have sufficient access to a functioning banking system or capital markets. Invest in small businesses / people you know. You're in Beijing - move out to the places that aspire to be more like a developed city, and just rinse and repeat.

I have a job in Beijing and frankly like it; I'm not an investor or a business guy, I'm just a programmer/researcher/geek who is living the life he wants to. If I was in the states, I would just throw my money in safe investments and buy a house; here all of that is impossible (well, you can do things with the banks, but kind of dodgy). My best bet is just to transfer money back home and play the American stock and real estate markets like my Chinese friends are already doing :p

Business and investment in China is absolutely crazy: your partners are more likely to screw you over than not, and in order to win you have to be constantly on your toes. When public construction SOEs are rebranding as internet companies, you can bet the smaller hole in the walls are doing the same!

Every third-tier city wants to be like Beijing. For example, my wife's hometown in Hunan (Chenzhou) has big aspirations but very little to offer. It is just heart break waiting to happen. Apartments being built everywhere shoddily without central heating...who wants to live in those?

That graph seems a bit sensationalist by using ~2800 as the base of its y-axis, and the stocks are still up for the year.

It looks like the stocks are down about 20% from their high, which isn't that unusual for a stock market (and probably is appropriate considering how much stocks went up this year).

I agree, I think the headline is sensational.

We changed the sensational bit to a more representative phrase from the article.

A 20% plunge in the West would be a disastrous thing or at least generate thousands of news articles about it, why does HN give a double standard to autocratic states? I keep hearing about how the ruble devaluation and now this are all perfectly fine. I don't think one article from Bloomberg is so horrible. Hell, I don't even see this on the front page of google news. Where is this massive sensationalism? Hell, is this even an issue on a site where pretty much all its politics is sensationalism to extremist degrees? Interesting what we find fault with here.

There's some real stupid bias on HN honestly.

The figure almost doubled in 2 months, then contracted 20%. If your stock is that volatile then 20% is not really newsworthy.

Their market has been in one of the greatest bubble runs in the history of stock markets. It's extraordinarily significant to see it go parabolic for weeks, then crash 20% in ten or so trading days, particularly given the amount of margin Chinese investors had taken on in such a short amount of time.

It very likely points to a further drop ahead. I don't think you'll be regarding a 40% drop as not being newsworthy.

It has nothing to do with China being autocratic or not, it's simply a very volatile market. The Chinese stock market is still UP for the year, and 20% is just correction territory, it's not close to a "disastrous" thing considering how quickly and how much it has gained recently. In fact, one may even argue it's healthy.

I'm certainly not suggesting its some great depression, but clearly its note and newsworthy and this article reflects that. Why the protesting about the article? What exactly is the problem? In autocratic regimes state media's job is rally stocks and, yes, the lack of which is very telling, which is what this article is about.

Again, what exactly is the problem here? If this was any Western economy, HN'ers wouldn't be falling over themsleves trying to dismiss it as sensationalist, especially when you consider the endless parade of anti-US sensationalism that often dominates this site and its collective narrative.

Because Western economies have been in dire straits for over a decade. A drop like that would be significant and unlikely to reverse. The West has no economic growth engine to fall back on.

China has had so much astronomical growth that this drop doesn't undo all of that overnight.

If it continues, and it may very well, then you have a story.

Also, it's not good to create fear in the general public which is another reason to downplay this. If it's met with hysterical headlines, then the event of a crash in the global markets will be a self fulfilling prophecy. Markets react to group psychology and FUD in the general public.

I just read that China has 21 trillion in their banks from people saving. It feels to me China has so many resources that they are unstoppable. Banks lend 10x the assets they have so that is 210 trillion available to lend. Not to mention the assets that the government has itself. There are so many state or partially state owned businesses that they can sell parts of. Even the debts of creating whole cities, it just doesn't seem to me that there is going to be any sort of damper on what China does. Especially with everyone wanting to throw money at them to get into business there.

BTC can move 20% one way or the other and it wouldn't be news.

Fact: Chinese markets have more volatility and it really isn't too newsworthy to see "Chinese Stocks moved a lot recently"

Are you really trying to use Bitcoin as a measure of normality?

Are you implying that we should use the Chinese Stock Market as a measure of normality?

The market dropped over 7% in a day, that's extreme for anyone other than a bitcoin speculator! The plunge could have been larger except for 70% of stocks hitting their automatic market stops.

http://ftalphaville.ft.com/2015/06/26/2133062/calling-a-top-...

Regarding the y-axis -- that is standard practice in financial graphs. You can see the same thing when looking at a related index in Google Finance: https://www.google.com/finance?q=INDEXDJX%3ADJSH&ei=LKGNVeHf...

I wish they would add an option to start the y axis at zero, to depict the asset's volatility.

Just zoom out to the 5 year view, same effect.

It's not meaningful to talk about absolute returns, what matters is returns/time. It's a 20% drop in less than a month, and that's pretty large.

Anyone care to speculate how that might impact real estate (short and long term), particularly US markets that have seen heavy Chinese investment?

Probably not too much. These are just trading losses. The SSE is still up quite a bit for the year.

A month ago, the amount of borrowed money invested in Chinese stocks was over $300bn. Margin calls will be exacerbating this drop in prices: http://www.taipeitimes.com/News/biz/archives/2015/05/23/2003...

Surely the times are interesting[0][1].

[0] http://i.imgur.com/C77vR9t.png

[1] https://en.wikipedia.org/wiki/May_you_live_in_interesting_ti...

The true insult is "May you live in boring times."

History is usually not that fun for the people who living through it. With the exception of the greatest minds in science, history is usually about people dying violently or at least suffering a lot.

Boring times don't sound so bad to me.

The stock market is up 35% since March. I don't understand what's being reported.

That the bubble has likely popped in Chinese equities.

$2 trillion - roughly 20%-25% - has been shaved off their markets in just two weeks or so. One of the largest, fastest stock market drops in world history in sheer dollar terms.

To put that in perspective, about 8%-10% of China's household wealth just disappeared in two weeks (80% or so of all investors in the market are individuals). The stock market run has been helping to bail out a lot of homeowners that had previously bet on the real estate market continuing to go up perpetually. If both crash at the same time, it's going to hammer China's fragile economy (that has shrinking across the board already: exports, imports, PMI, electricity usage).

"China’s stock market is really different from other countries"

Yeah, just add an opaque, government overseeing and controlling all information of Chinese stocks. Nothing to see here folks.

The graph is quite misleading by not being logarithmic - it makes the gain seem smaller than it really is, and the loss larger.

A logarithmic graph will show that this drop is minor compared to the rise before it.

Well here's the five year:

http://i.imgur.com/3vMDYlx.jpg

That's the setup to an inbound market disaster if I've ever seen one. Especially given China's falling corporate earnings and all the other blatantly negative signals in their economy right now. This market run occurred solely due to margin, and not due to growth; the outcome was always obvious ahead of time.

Wow! That market doubled in the past year? I knew it was hot but I didn't know it was that hot. It will be interesting to see where this goes.

Pretty sure nobody uses logarithmic graphs for stock prices...

All serious investors do. Anyone who doesn't is misleading themself, which is a good way to lose money.

Funny, it never came up while earning a finance degree.

Seriously? That's a pretty large lacuna in your education. You should complain to your school.

At least it's pretty easy to learn about it on your own. Once you do you'll rarely use linear graphs anymore.

Well, having gone to a top-15 bschool, I'd expect that if it were really so prevalent, that it would have come up, at least once. Especially from the prof whose class was interrupted by reporters for the local news companies. (This was 2009...)

I've used logarithmic graphs heavily in server and system analysis. Sometimes it's incredibly useful, and sometimes it's completely worthless. It's not like one is more useful than the other, each show the data differently, and each view has its uses.

A logarithmic graph scales by gain/loss per dollar, which is often more illuminating than the gain/loss per share.

E.g. a $10 share going up to $20 is much better for investors than a $110 share going up to $120, even if the absolute gain is the same.

Ah, so it's a badly-worded view. It could be called a "gain/loss graph".

That perspective would be much more useful in business. It's so useful that car dealerships have been fighting the same idea - the change from MPG to Gal/100mi.

> bschool

Well there's your problem.

Absolutely. People still believe them "schools" give them proper education. Oh well..

Lots of schools do. Not business school so much.

A logarithmic graph looks more or less the same as the normal graph.

You do use log functions for some predictive algorithms, but not for charts.

Compare:

https://upload.wikimedia.org/wikipedia/commons/0/01/United_S...

and

https://upload.wikimedia.org/wikipedia/commons/archive/0/01/...

The logarithmic graph makes it clear all percentiles grow at exactly the same rate. The linear one tricks you into thinking the top level grows faster even though it doesn't.

The y-range is different this why the chart looks flatter. Nobody uses log scale for stock prices. A log scale only makes sense if the range of values is over multiple orders of magnitude (1, 10, 100, 1000, 10000, ...).

Well obviously the y-range is different! That's the whole point! The data is identical though.

A logarithmic graphs show differences (i.e. growth or decline) between values, while a linear graph shows absolute values (i.e. what fraction out of a whole).

You do not need multiple orders of magnitude to make logarithmic worthwhile. What matters is the kind of data (change in value, or absolute portion of a whole), not the range.

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