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Chinese Fund Managers Sentenced to Death after Cheating Investors out of 1 Billion USD

HANGZHOU – Two brothers and their father were sentenced to death on Monday for cheating 15,000 investors out of over $1.1 billion in east China’s Zhejiang province. Ji Wenhua, president of the Yintai Real Estate and Investment Group, was sentenced to death for the crime

Gold at $7,000 article goes viral in Chinese media

Dan Collins CMR “Gold going to $7,000″, an article today in the Chinese media is going viral and one of the most viewed articles in the financial press. The article references American Jim Rickards and his concept of comparing inflation-adjusted gold prices. Most Chinese economists

Western paper markets manipulate gold prices lower as China takes the real stuff off the market.

It’s not uncommon for the large Wall Street banks to combine in shorting an entire years supply of minded silver in a single day.The same goes for all commodities. Endless paper printing getting funneled to Wall Street has destroyed all real price discovery. Capitalism fails

Chanos is back….This is getting sad

Chanos is back! His short China thesis is very long in the tooth but as it goes with most ego maniacs he cannot accept failure or that fact that he might be wrong. Being wrong on an entire country where you have never visited and

“American Collapse Theory” Gaining Ground in China

Dan Collins CMR When I moved to China back in 1998 I was surprised to learn how highly the Chinese thought of America. Of course China was a much poorer place back then but coming from the Detroit area I couldn’t fathom where was all

China Car Sales Up 22.6% -The Chinese economy is collapsing?

You have to laugh at the whole “China will collapse crowd” on CNBC and even respected sites like Zero Hedge. Personally, I love the Zerohedge stuff. They understand the ponzi-financial fraud-money printing-welfare state economy that now envelops the West. But China is a real economy,

Cloud Computing in China booming as American giants are pushed out

D.Collins CMR China’s cloud computing market is expected to be worth 37.2 billion yuan (US$6 billion) in 2017 as demand for the service grows, the Chinese-language China Securities Journal reported on Friday. Some American tech companies are watching the largest and fastest I.T. market in

Oil rig dispute could see repeat of Sino-Vietnamese War: report

Breaking News today that a Chinese vessel as rammed and sunk a Vietnamese fishing boat. All countries in the South China Sea and East China Sea are using fishing boats in a game of cat-and-mouse to challenge each other on their respective areas. This time

France relents to China, Chinese police to help patrol Paris streets

Scared of losing the Chinese tourist dollar, France has relented to China and will allow Chinese police on the streets of Paris. More signs of the benefits of third-world immigration into the West to the point where cultural breakdown has occurred and law and order

People’s Bank of China will take down global gold price manipulation

Gold has been flowing East for a decade. When the West wakes up to the fact that their gold is gone, they will no longer have sound money with which to back a currency. The world has only been off a gold standard since 1971

China to lower reserve requirement ratio

From the China Daily… BEIJING – China will lower banks’ reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country’s central bank announced Saturday. The cut, the second of its kind this year, will drop the RRR for the country’s large financial

Chinese Officials Falsify Data To Mask Slowdown, NYT Says

Is China tweaking its numbers on GDP? Probably. For twenty years Chinese GDP roughy came in right on the governments target. This would be an almost magical performance record considering economists in the West can predict absolutely nothing. For years, China most likely lowered GDP

Japan Learning the Hard Way, Destroying your Currency is Not an Economic Strategy

Japan will learn the hard way that destroying your currency is not an viable economic strategy. Shanghai Daily JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in January as rising exports trailed surging imports of crude oil and gas due to rising

American GDP: The Fantastic Fiction of American Economic Strength

American GDP: The Fantastic Fiction of American Economic Strength By Dan Collins Is the U.S. economy still the most powerful in the world? That is what we are told as the United States does have by far the world’s largest Gross Domestic Product (GDP). In

Government tells Huawei that they are not allowed to spy on Americans. Only they can do that.

Youtube, Facebook, and Twitter are all blocked in China. They have algorithms in place to disrupt Google service as well which makes it very annoying even using Google here. You get many dead links when the algo’s are working. Despite blocking American companies in China,

Jack Ma refutes allegations of crashing China’s stock market

Want China Times

Jack Ma, the founder and executive chairman of Chinese e-commerce giant Alibaba, has vehemently denied allegations that a company he controls is responsible for wiping US$3.9 trillion off the Chinese stock market in less than three weeks.

On Monday, the China Securities Regulatory Commission reportedly paid a visit to the Hanzhou-based Hundsun Technologies, which is 20.6% owned by Ma’s financial investment company following a US$532 million investment last year.

Investigators said they were “looking for clues” and investigating whether Hundsun complied with market rules. The probe is believed to have been sparked by online posts over the weekend that blamed Hundsun’s HOMS system for automatically closing margin-trading positions, leading to increased volatility and selling pressure.

HOMS, a cloud-based system, was initially developed in 2012 for small- and medium-sized management firms, but is now widely used by gray market financing firms for margin lending, offering borrowers significantly higher credit than that allowed by official lending limits.

According to Dow Jones, HOMS brought in about 440 billion yuan (US$70.9 billion) of the 500 billion yuan (US$80.5 billion) grey market funds funneled into the stock market.

However, Hundsun has denied that HOMS is responsible for the stock market crash, noting in a filing with the Shanghai Stock Exchange on Monday that only 30.1 billion yuan (US$4.85 billion) was force-sold through HOMS between June 15 and July 10, representing only 0.1% of total transactions during that period.

“It’s not objective or rational to say that HOMS was the major force of the stock market turmoil,” Hundsun said in the statement.

For his part, Jack Ma took to Sina Weibo, China’s version of Twitter, expressing “astonishment” from reading that Hangzhou has been pegged as the origin of the stock market rout and that he was somehow responsible.

Posting from Europe, Ma, China’s second richest man with a fortune estimated by Forbes to be in excess of US$22.5 billion, said he has been on business abroad lately and does not even have the time to keep track of the stock market. He said he had given up speculating in the stock market a long time ago because he is “someone who was among the earliest to be hurt by stocks.” He added that he was not involved in manipulating the stock market, likening himself to someone who being shot at despite already lying on the ground.


Chinese stock market finishes down -19.21% for the month but up 17.48% for the year

The CSI 300 Index finished today at 4,151.5 up +1.09%.

The CSI is down 19.21% for the month but up 17.48% for the year.

– China GDP for 2Q increased 7.0% yoy – higher than market expectations
of 6.8%.- China’s retail sales for June were up 10.6% and Industrial
production up 6.8% – both figures were above market expectations.-

Exports in June were up 2.8% and imports down 6.1%, resulting in a trade
surplus of US$46.5 billion for June. China continues to be helped
by the collapse in global commodity prices.

-The PBOC conducted two separate 20 billion RMB 7-day reverse repos, both
at 2.50%. There were 85 billion of reverse repos coming due this week,
resulting in a net 45 billion RMB drained from money supply.

-China issued new rules making it easier for foreign central banks, sovereign
wealth funds and global financial organizations to access its interbank bond
market. They will no longer need pre-approval to trade bonds, interest-rate
swaps and conduct repurchase agreements, and can do so after filing a
registration form.

Western Financial Propaganda Press Continues China Onslaught

The Western Press has been predicting collapse in China for nearly two decades
now. And usually after every story they have to crow-bar the ending sentence
which usually ends with something like, …”oh, by the way, car sales are up
24%”. But that is also signs of a collapse. And all those wage increases,
and new airports, and educated population. Just more evidence of collapse of

The latest gyrations of the stock market have provided ample fodder to the
minions in the U.S. journalist press struggling to hold on to their jobs in an
online world. Ever eager to please their bosses , they continue to feed made-up
bullshit like the story below. Anyone could find a home jockey sitting in one
of the thousands of real estate offices in Shanghai to basically tell you
anything you want.

What they won’t tell you …is the U.S. GOVERNMENT IS PRINTING MONEY TO
FUND EBT CARDS. Now…that’s the real story which you won’t read from them.


Indonesia plans naval base in S China Sea; blasts China’s 9-dash line

Want China Times

Indonesia is planning to build a military base in the South China Sea that may be within the territory marked by China’s controversial nine-dash line.

The Jakarta Post reported that Indonesia’s Defense Ministry and the National Development Planning Board (Bappenas) have already held a meeting last Friday to discuss the potential location of the base, which has been narrowed down to Sambas, West Kalimantan; Natuna Islands, Riau Islands and Tarakan, North Kalimantan.

Bappenas chief Andrinof Chaniago said Friday’s meeting was aimed at “synchronizing our ambition to guard the national interest and protect the sovereignty of our territory.”

While China and Indonesia are not directly involved in any territorial disputes, the waters surrounding the Natuna islands are claimed by Beijing under the U-shaped nine-dash line, the demarcation used by both China and Taiwan for their claims to the majority of the South China Sea.

Since 2014, Indonesia officials have repeatedly criticized China’s assertiveness in the South China Sea, which has included extensive land reclamation activities and military constructions on islands disputed with the Philippines and Vietnam, among others.

“China has claimed Natuna waters as their territorial waters. This arbitrary claim is related to the dispute over Spratly and Paracel islands between China and the Philippines. This dispute will have a large impact on the security of Natuna waters,” assistant deputy to the chief security minister for defense strategic doctrine, Commodore Fahru Zaini, said last March.

“Indonesia is dismayed…that China has included parts of the Natuna islands within the nine-dash line, thus apparently claiming a segment of Indonesia’s Riau islands province as its territory,” General Moeldoko, commander in chief of the Indonesian National Armed Forces, wrote in the War Street Journal at around the same time.

“The Indonesian military has decided to strengthen its forces on Natuna. We will need also to prepare fighter planes to meet any eventuality stemming from heightened tensions on one of the world’s key waterways,” he added.

In February this year, General Moeldoko said he expected the South China Sea to be a “flashpoint” in the future.

Even Indonesia president Joko Widodo has chimed in on China’s nine-dash line, saying in March this year before a trip to Japan that the line has “no basis in any international law.”

China’s take on Greece- Euro to be significantly affected, U.S. Dollar to rise, which we don’t want to see

Taken from an op-ed in Beijing

After racking up debt as high as €400 billion since 2009 and being unable to pay off rescue loans from the European Union and the International Monetary Fund, Greece is on the verge of being forced to leave the eurozone. If this becomes a reality, the value of the euro will be significantly affected, and the US dollar will rise along with America’s political power, resulting in long-term effects neither Europe nor China will want to see, Mu added.

Europe is China’s largest trade partner and China’s slowing economy wants to keep expanding exports to the continent.

“Even though Greece is an internal EU affair, the issue concerns China, as a key EU trading partner, but also because it affects the world’s financial stability and economic recover.

To prevent the damaging effects of Greece leaving the eurozone, China should be willing to team up with the EU to formulate a rescue package but if the risks of Greece’s departure from the eurozone can be somehow contained — whether it is geographically or temporally — then the negative impact can be restricted, and China may even receive some benefits out of it.

The impact of the Greek debt crisis is undeniable, regardless of whether Greece leaves or stays in the eurozone. A near-€400 billion (US$446 billion) hole cannot be filled even with China’s intervention, meaning the long-term value of the euro must necessarily fall. Under such circumstances, China can use the opportunity to swoop up assets in Europe at a discount and increase cooperation with struggling European companies to the mutual benefit of both sides.

As to the second requirement, China is particularly concerned about the direct impact of the crisis on its investments at the port of Pireaus, Greece’s largest commercial seaport, where state-owned company COSCO controls several container piers and has been trying to acquire a majority stake since Athens put it up for sale.

While Greece only has a population of around 11 million people and has no natural resources for China to exploit, the port is a key piece of Chinese investment that can be considered a form of financial assistance, and Chinese leaders have plans to connect it to infrastructure investments in the Balkans and in southern Europe. Greece is thus a window to the Mediterranean and a pivotal point of the belt and road initiative for China.


Chinese short seller found and captured

A Chinese short-seller was found hiding this weekend by authorities in a
squalid apartment in the Pudong district next to the new Disney theme park.
It’s a magical world after-all.

The short seller was found hiding with 2 cartons of Hongtashan
cigarets, a bottle of maotai, and 5 illegal pornographic DVD’s of Japanese
porn star Sola Aoi.

The short-seller is now in the custody of local authorities.


China retains world’s largest spot gold trading market for 8th year

China has retained its lead as the world’s largest market for spot gold trading for the eighth year, as growing participation by offshore investors fueled trade growth, the Shanghai Gold Exchange said Thursday.

Trading of gold surged 166% during the first half this year to 17,520 tonnes, while that for silver jumped 151% during the same period to 380,000 tonnes.

Trading of bullion and silver totalled 4,764 and 525 tonnes respectively at an international board set up for offshore investors in the Shanghai Free Trade Zone in September.

The World Gold Council estimates demand for bullion from China and India, the world’s top two buyers, will stand between 900 to 1,000 tonnes this year.

Other than being the world’s largest producer and consumer of the precious metal, China is also striving for a greater say in the pricing of gold.

The Shanghai Gold Exchange will establish gold fixing denominated by the Renminbi by the end of this year in a bid to compete with London and the US Comex over pricing of the precious metal.

Currently the pricing of gold is dominated by western markets, as markets in the UK and the United States account for more than 90% of gold traded. China’s onshore gold market took up 4% of global turnover in 2013, according to ANZ.

“The opening up of China’s gold market to international investors could provide a sharp boost to trading volumes on the exchange,” said ANZ chief economist Warren Hogan in a March research note.

“The tendency of the Chinese market to trade at a discount or premium to the global spot price could also attract investors to the exchange, with the pricing of the contracts in renminbi being another attractive aspect,” Hogan said.

Ministry of Public Security going after Short Sellers

[Ministry of Public Security in conjunction with the recent Commission investigation of malicious short stock and stock index clues] correspondent was informed on the 9th morning, Vice Minister of Public Security Meng Qingfeng led to the Commission, in conjunction with the recent Commission investigation of malicious short stock and stock index clues show regulatory authorities to the operation of heavy combat illegal activities.

The PSB has vowed to crack down on illegal and criminal activities in the field of securities and futures as well as cracking down on the spread of rumors and have warned people could be prosecuted.


Iranian oil about to flood the market

Rumors abound of Iranian oil set to flood the global market .It is highly
expected now that Iran will capitulate to inspections of nuclear facilities.

The impact will be to permit Iran to rejoin the global economy for the first
time in 36 years.

This paves the way for Iran to double its oil exports from 1.2 to 2.4 million
barrels a day immediately, and then double them again once desperately needed
energy infrastructure investments are made.

The Reuters news agency is reporting that 38 million barrels of Iranian oil
are sitting in 15 VLCC tankers slow cruising the Persian Gulf and Indian Ocean.

WTI is now down from $62 to $51, some 18% in only few weeks.

How low can the price go?

Saudi Arabia has started cutting prices for and is ramping up production. We could see
oil meet the $43 low of March after the summer driving season in the U.S.

Could it go lower?

Saudi Arabia’s current production cost is $5 per barrel , plus a 20% profit
margin and $4 for shipping. Back in 1998 were were at $8/barrel.

iran oil

The Trade Deficit “Glitch in the Matrix” of the so-called American Recovery

The Fed’s favorite buffoon, whom they utilize with leaked information to
spin their false recover stumbles all over himself on how such a bright and
vibrant economy can no longer produce anything for themselves….other than
EBT cards of course. It’s the second month in a row with a trade deficit over
$40 billion. With the last remnants of American manufacturing beating a quick
path to Mexico and American multinationals acquiring EU based companies in
order to move their tax domicile, things will only get worse.

Global Oil prices continue price crash


Stephen Roach’s bull case for China

Shanghai Chaos Fund now controlling global copper prices

Shanghai is quickly replacing the London Metal exchange due to the vast
financial resources in China and the fact that the Shanghai exchanges are sitting
on top of the largest real production economy on the planet. No one in the
U.K. is making anything anymore.They don’t mine copper, smelt copper, or use its
end product which is usually copper wire for electrical or electro-mechnial use.

Excerpts from FT.com

Ge Weidong, chairman of Shanghai Chaos Investment, is a renowned trader in China.
He is the second-largest shareholder in China Minsheng Bank in Hong Kong, with a
stake worth over $500 million, according to filings. He is also the third largest
shareholder in Ping An Bank with a stake worth over $600 million.

The company’s philosophy is that the “market is chaotic, nobody can have all the
information, or all the factors, so you should always maintain a bit of awe towards
it”, according to its website. Ge wrote on his Weibo account in April, “I’m bored
so will say a few words: I don’t know how high the stock market will rise this round,
I only know it will be very high, very high!”

Set up in 2005, Shanghai Chaos was behind a so-called bear raid which drove a dramatic
plunge in the price of copper in January to its lowest levels in more than five years.
The move happened while traders in London were asleep and during a period of weak demand
in China, when low oil prices were also causing investors to pull money from the sector.

Even though China still has capital controls, analysts say prices on the London Metal
Exchange are increasingly taking their signals from Shanghai. When futures prices on
the Shanghai Futures Exchange hit their daily limit of 5 per cent, that downward
pressure can spill over on to the LME.


Demistifying the Greek Tragedy

Farrokh Langdana,
Professor Econ/Fin, and Director, Rutgers EMBA

Here is a primer that may help demystify the present travails of the Eurozone. I have gone to the very fundamental “bedrock” causes of the present agony of the Southern European economies. We are sticking with very basic macro-issues here, and not getting distracted with who said what to whom, and who promised how much to which institution.

The very fundamental problem in the Eurozone is one that was discussed in class and in the first edition of my 4th book, “Macroeconomic Policy: Demystifying Monetary and Fiscal Policy”, way back in 2002. The current problems in the Eurozone do not have that much to do with Greece, per se, but instead, they have their genesis in the original design of the Eurozone—the impossibility of “marrying” two fundamentally different macro-models to one set of fiscal and monetary constraints. The Southern European economies are all Keynesian, while the French, Germans, and the Benelux (Belgium, Netherlands and Luxembourg) economies, are supply-sider. This is worse than oil and water; the two models simply cannot mix.

Why is that so?

Keynesian economies can indeed stimulate output and can create jobs by actually increasing government spending on infrastructure, etc., and (if confidence has not crashed) by increasing monetary growth and weakening their currencies (and thereby spurring exports in the short run). In other words, when these economies find themselves in a pickle, they can create infrastructure projects to jump-start growth and jobs, and also devalue their currencies to increase exports. (From our macro days in class, Keynesian economies have a positively sloped aggregate supply curve.)
Supply-sider economies, in sharp contrast, would vociferously disagree with these policies; in their world, government spending does nothing to create growth and jobs, and increasing money growth to weaken (devalue) one’s currency only results in inflation in the long run. In short, supply-siders strongly believe that increasing government spending or loosening money growth is one vast and obscene exercise in futility. (Their model has a vertical aggregate supply curve.)

So how does this tie-in with the mess in the Eurozone today?

The Eurozone has been designed by supply-side Germany, with France essentially providing moral support. Its monetary policy is conducted by the European Central Bank (ECB) in Frankfurt, that, until lately, strongly disapproved of attempts to loosen money and weaken the euro, thanks to the searing memory of the ravages of the German Hyperinflation of 1919-23. In the Eurozone, the 19 member countries have no ability to influence their individual money supplies. It would be as if the internal temperature for your house was decided in, say, the NJ State capital in Trenton. If you wanted to adjust your air conditioning to make your house cooler, you would not be able to do so—only Trenton could do that! And if Trenton decides that the temperature is fine, then it will not change it. This is the famous “one size fits all” monetary policy that, ultimately did not “fit all”. In addition, the Eurozone has the Stability Pact with prevents individual countries from increasing government spending by imposing upper limits on allowable budget deficits. So Keynesian Italy, Greece, Portugal, and Spain were powerless upon joining the Eurozone; they could not press their Keynesians buttons to revive their economies.

But what makes one country “Keynesian” and another “Supply sider”?

Very simply, if the percentage increase in inflation is rapidly matched by an equal increase in wages, then the economy has a vertical aggregate supply curve, or is a supply-sider economy. So, if inflation is 3% and wages are quickly pushed up to 3% by typically high-skilled workers who have market power, then we are in a supply-side model. In a Keynesian world, if inflation is, say, 5%, wages may go up only 2 or 3 %, for example. Emerging economies are typically Keynesian economies.

So we have the Southern Europeans unable to do what they should be doing to provide some macroeconomic relief, thanks to the straightjacket of the Eurozone! But why would they agree to be in the Eurozone in the first place? If we can see the futility of the “one size fits all” monetary policy, and the restrictions of the Stability Pact in just a few paragraphs here, how on earth could this thing have reached this sorry state?

It is very important to keep in mind three points here. (i) The Eurozone was never ever designed to be a macroeconomic tour de force; it was never meant to be a macro masterpiece. The fundamental original driving force for economic unification in Europe was that France and Germany should never go to war ever again. To this end, it all began with coal and steel unification between France and Germany after WWII. The economic union (the EU) and then the monetary union with the common currency and common monetary policy (the Eurozone) were add-ons that came much later.
(ii) It is very important to understand that when the Eurozone was formulated in 1979, the political landscape of Europe was very different. Germany was just a manageable West Germany then. The Soviet Union’s brooding presence served to bind the member countries together for mutual protection. But after the Eurozone was up and running, both the above equations changed! Germany became a giant again, and the Soviet Union’s dissolution removed much of the pressure on Europe to stick together.
(iii) Finally, labor was supposed to be mobile within the Eurozone—much like within the United States. That never happened. Unemployed workers from say, Greece, would not and could not move to another country that might have plentiful jobs. The restrictions on labor mobility within the Eurozone, particularly regarding medium- and low-skilled labor, coupled with the inherent and historical cultural and linguistic challenges, prohibits movement.

But then, if their lives were clearly going to get worse, why did the Southern Europeans join the Eurozone in the first place?

Well, initially, their lives got better. Most of the Southern European countries are “receiver” countries. Upon being admitted to the Eurozone, they benefitted from large grants and financial and trade assistance from the other Eurozone countries. It was a big privilege to be part of the Euro ‘club’; it was an exclusive club and membership required demonstrable fiscal and monetary disciple. Well, many of the Southern European economies may have adopted creative accounting techniques to show fiscal/monetary discipline (the Maastricht convergence criteria) in order to be admitted into the Eurozone. And the rest of the Eurozone, like Nelson at Copenhagen, turned a blind eye to these accounting sleights of hand. At that time, there was an obsession to have a Eurozone that was “bigger” than the US in population, GDP, etc., and Eurozone membership was dispensed quite freely. It was only later, when their economies slowed and when they realized that the macro policies that had pulled them out of recession in the past were no longer available to them, that things took their tragic turn for the Southern Europeans.

So what are the implications for the US?

The European Central Bank, historically well known for its strong monetary discipline, is run today by a Keynesian Italian, Mario Draghi. This is tantamount to a Buddhist monk being head chef at a Texas steak house; it just will not work. The new ECB today has scandalized the German financial establishment by increasing money growth to create jobs and growth; in short, by behaving like a Keynesian institution. The ECB is now attempting its version of quantitative easing (QE), which is nothing but massive monetary growth. This will not work, just as it has not worked here or in Japan. As long as business confidence is low, printing money will do nothing. This is the dreaded “Liquidity Trap” situation that we and the Japanese have just lived through.
Be prepared for much of the European and Asian liquidity to find its way into the US stock and housing markets. Be prepared to see the Europeans, Asians, and Brazilians snapping up houses here, and pumping up US equities. Expect to see a constant downward pressure on our interest rates–Janet Yellen’s warnings of rate hikes notwithstanding–thanks to the flood of hot capital that will be parked here, the last real Safe Haven in this troubled world. Expect the best minds of the traumatized countries to leave their homes and families and seek fertile ground here, in the United States. In all this global turmoil, paradoxically, the stage is set for the United States to, once again, wrest global macroeconomic and political pre-eminence. But who will lead us there?

Keep Calm and Asset Allocate

Gerard DeBenedetto
Former CEO at An Zhong (AZ)
Investment Management Shanghai

Reading the western media coverage of the A Share market makes you want to avoid Chinese stocks all the time. Ghost cities, overvaluation, manipulated, roach motels, etc. Conversely the Chinese media (not to mention We Chat groups) is consistently overly optimistic and dependent on Government intervention. Thankfully there is ample middle ground.

While the regulators have and will continue to introduce new policies and tweak old ones, the long term goal is clear and unwavering – They want a global capital market and realize the many incremental steps and negotiations involved to get there. This brings in RMB internationalization and interest rate liberalization as well into the mix. But back to the stock market in particular. Let me dismiss the notion that the Government can somehow control the stock market with three simple observations:

The biggest beneficiary in a rising market is the party and since the party always comes first, it would be logical that a rising market benefits those in power (recall the party still owns most of the equity outstanding). This has clearly not been the case – recall the period from the summer of 2009 to the summer of 2014 when large caps lost 40%. Also remember we are still below the all time high hit in 2008
GDP is generally considered a controlled number and it is remarkably predictable. If the government could control the stock market, the chart would look marvelously up and to the right.
Size does matter – the retail investor rules in China and although the average account is small, there are still more than 90 million retail investors in the $9 trillion stock market and when they rush in or out they will dictate price
So that leaves us with jittery retail investors and a government that continues to introduce policy changes. What should a long-term, level-headed investor do? Those of you who know me can easily predict my answer – Asset Allocation. Since my relocation back to NYC, I’ve been talking to institutional investors and investment managers who continually say they don’t allocate by country and they will simply gain their China exposure through the global indexes. This is not only intellectually lazy, it’s a loser from a risk adjusted return perspective. Over any rolling 5 year period, it is better to allocate at least 20% to cash and fixed income as the underlying volatility of the equity indexes never adequately compensates the risk taker.

So how do you successfully allocate your China exposure? In the past, I’ve talked about owning 3 broad China asset classes (Large cap stocks, Small cap stocks and RMB Cash). The reason for two equity classifications is that large caps and small caps exhibit very different return profiles and the reason for only one fixed income bucket is 1) access – there is not a pure, transparent fixed income fund/ETF available and 2) the yield pickup further out on the curve and down in credit quality is not fairly compensated. In April I recommended swapping out of some small cap exposure into large caps and increasing exposure to fixed income/cash as valuation was already stretched. As we sit here today, it looks like there is going to be more selling on the equity side, but short term rates are creeping up with the 7 day repo printing just under 3% last week. Finally, remember that not all Chinese ETF’s are A shares so for large caps, look at KBA or PEK, for small caps ASHS and for cash, KCNY or CBON.

20-plus China listed firms’ executives to increase shareholdings

After the recent heavy losses of Chinese shares, executives, board members and controlling shareholders of more than 20 listed companies have announced their plans to increase shareholding of their firms in an effort to curb the losing streak.

Nine listed companies on the Shanghai Stock Exchange, including environmental protection firm Beijing GeoEnviron Engineering & Technology and 14 listed enterprises on the tech-heavy Shenzhen Stock Exchange made the announcement over the weekend, according to filings to two exchanges, showing executives and board members’ confidence in their companies.

Share financing from brokerages and other sources helped propel the Shanghai Composite Index to double within a year by June 12, but the market has been experiencing a slump over the past few weeks, with the index losing more than 28% from its peak on June 12 by Friday.

Many long-term investors and analysts said the market correction has created good investment opportunities.

“A raft of supportive monetary measures has been adopted and China’s economic growth has stabilized, so blue-chip companies and shares related to the Internet and state-owned enterprise reform enjoy sunny prospects,” said Shi Bo of South China Fund, a major equity fund management firm.

Twenty-five Chinese publicly offered funds reported confidence in maintaining a stable and healthy development of the stock market on Saturday. Board chairmen and presidents of the funds said they will offer more products to buyers and promise they will vigorously purchase their own products and hold them for at least a year.

Leading brokers in China vow to stabilize stock market

Want China Times

China’s 21 major securities brokers convened on Saturday, vowing to “firmly” stabilize the country’s stock market, which has been shaken by continued plunges.

The brokers will spend no less than 120 billion yuan (US$19.62 billion), or 15% of their total net assets, on exchange traded funds (ETF) that track the performance of blue chip stocks, according to a joint statement.

These firms will not sell the stocks they held as of July 3 and will buy more, at their own digression, when the benchmark Shanghai Composite Index is below 4,500 points.

They will also actively repurchase stocks in their own company from the market and encourage major stock holders to increase their stakes.

China’s top three brokers — CITIC Securities, Haitong Securities and Guotai Junan Securities — were among the 21 signatories of the statement.

The Securities Association of China said in a statement that it appreciated the brokers’ decision and asked all brokerages to view the economic situation and capital market in a correct way and take similar actions to underpin the ailing market.

Zhang Shuyu, a finance researcher with the University of International Business and Economics, said the brokers’ move will likely cushion the downward pressure on the market.

The brokers’ meeting on Saturday is the latest attempt to break the market’s three-week losing streak, which has cut the benchmark Shanghai Composite Index by more than 28%.

Last Saturday, China’s central bank lowered both the interest rate and reserve requirement ratio for banks to inject liquidity into the market.

On Wednesday, the Shanghai and Shenzhen stock exchanges announced a roughly 30% cut in stock transaction fees.

On the same day, the China Securities Depository and Clearing Company announced a reduction in stock transfer fees by about 33% from Aug. 1.

On Thursday, the China Securities Regulatory Commission (CSRC) said it will investigate suspected manipulation of the stock market.

On Friday, the CSRC said it will cut the number of IPOs in July in order to reduce the supply of stocks.

However, the steady drumroll of supportive policies has failed to reverse the trend.

Shanghai shares have fallen nearly 30% in past three weeks

On Friday, the Shanghai Composite fell another 5.8 per cent, taking the drop to 28 per cent since the June 12 peak. Over the past 15 trading days, more than $3tn has been wiped off the value of Chinese listed companies — more than the Spanish, Russian, Italian, Swedish and Dutch stock markets combined.

Warnings of pending doom had been growing louder as both the Shanghai and Shenzhen markets more than doubled over the past 12 months, a rally powered by massive amounts of borrowed money to buy stocks.


Greek banks prepare plan to raid deposits to avert collapse


Greek banks are preparing contingency plans for a possible “bail-in” of
depositors amid fears the country is heading for financial collapse,
bankers and businesspeople with knowledge of the measures said on Friday.

The plans, which call for a “haircut” of at least 30 per cent on deposits
above €8,000, sketch out an increasingly likely scenario for at least one
bank, the sources said.

A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013,
when customers’ funds were seized to shore up the banks, with a haircut
imposed on uninsured deposits over €100,000. It would be implemented as part
of a recapitalisation of Greek banks that would be agreed with the country’s
creditors — the European Commission, International Monetary Fund and European
Central Bank. “It [the haircut] would take place in the context of an overall
restructuring of the bank sector once Greece is back in a bailout programme,”
said one person following the issue. “This is not something that is going to
happen immediately.”

Eurozone officials said no decision had been taken to wind up any Greek banks
or initiate a bail-in of depositors, a process that would be started by the
ECB declaring the banks insolvent or pulling emergency loans.

Greece’s banks have been closed since Monday, when capital controls were imposed
to prevent a bank run following the leftwing Syriza-led government’s call for
a referendum on a bailout plan it had earlier rejected. Greece’s highest court
rejected an appeal by two citizens on Friday who had asked for the referendum
to be declared unconstitutional.

Depositors can withdraw only €60 a day from bank ATM cash machines, while
requests to transfer funds abroad have to be approved by a special finance
ministry committee in co-operation with the Greek central bank.

Two senior Athens bankers said the country had only enough cash to keep ATMs
supplied until the middle of next week. This followed the ECB’s decision this
week not to increase Greece’s allocation of emergency liquidity assistance
after the bailout programme ended on June 30.

The outcome of Sunday’s referendum will determine how quickly Greece wraps
up a new bailout agreement with creditors, a top Greek banker said.

“China’s Uber” to challenge Uber in the U.S.

Want China Times

With an expected completion of fresh fundraising to the tune of US$2 billion, China’s leading chauffeur services app Didi Kuaidi is preparing to extend its operations to the US, according to JMedia, citing insiders.

JMedia reported that Didi Kaidi is recruiting staff for its projected US operation, which will include an R&D center.

The US project appears to be part of an expansion plan following a last round of fundraising which will bring in upwards of US$2 billion. This is even higher than the US$1.5 billion in fundraising one by Uber, the leading app-based chauffeur service provider worldwide.

The fresh funds are expected to enable Didi Kuaidi to consolidate its leading status in the Chinese market, fending off Uber, which launched its China services in Shenzhen in July 2014 and has extended the span of its service to six cities in total, including Shanghai. “In terms of the number of services, our scale has been 10 times that of our rival in China and three times worldwide,” said Chen Wei, CEO of Didi Kuaidi.

The company’s statistics report that daily orders for its driver services have topped 3 million, up from 1 million in early May, on top of 3 million taxi-hailing services, the latter for 99% market share.

Insiders said that in addition to business expansion, the US project will greatly boost the company’s technological level. On top of its plan to set up an institute of mechanical learning, which will augment its data processing capability, it is also expected to help it provide convenient, efficient and environmentally friendly services.