I was wondering when we would cross the line to make this official: China’s markets are off more than 20%:

“China’s accelerating inflation and surging house prices are adding pressure on policy makers to raise interest rates and allow yuan gains even as their concerns over Europe’s debt woes persist.

Property prices rose at a record pace in April, consumer prices climbed at the fastest rate in 18 months and new lending exceeded the forecasts of all 24 economists surveyed, figures showed yesterday.

China’s stocks dropped yesterday, sending the benchmark index into a bear market, on concern the government will raise borrowing costs and unveil more measures to cool the housing market. The central bank highlighted risks to price stability in a report on May 10 even as it pointed to added uncertainty over a global recovery triggered by the euro zone debt crisis.”

Discuss . . .

China’s Bubble Risk Adds Tightening Pressure Amid Debt Crisis
Kevin Hamlin, Li Yanping, Jay Wang
Bloomberg, May 12 2010

Category: Markets, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

31 Responses to “China Bear Market”

  1. thumbcharts says:

    The interesting thing to note is that it is actually the Bovespa that has had the best performance of the BRIC indices since the crisis began…which isn’t saying much as it barely broke above even before recently dropping back.

    As you can see from this chart, the Shanghai index is still down over 52% from the peak back in October of 2007.


  2. Mike in Nola says:

    China will be the cause of the big leg down. China’s government’s buying of commodities and it’s citizen’s speculating in them that has supported prices while making Australia affluent and allowing commodity traders to make money. It’s already bought more than it can use and it’s citizens will exit their trades at some point when they need cash. Collapsing commodity prices will cause a domino effect across the markets. It’s a matter of when.

  3. TakBak04 says:

    I dunno, BR…. Wasn’t CNBC, WSJ..and to some extent “Bloomberg” telling us we should be investing in China, Emerging Markets because our financial system would “de-couple,” so Emerging was the Big Deal?

    Seems I was hearing that since Lehman Brothers imploded? Maybe I don’t listen carefully but that’s what I think the “mainstream” investor might have heard the last couple of years.

    But, those of us who read the Financial Blogs…like “TBP” and others were clued in that not all was what it seemed to be by the “talking heads yappers” on CNBC/Market Watch/Yahoo Finance and to some extent Bloomberg but definitely the WSJ and Forbes, etc.

    So…here we are…and China has built cities where there aren’t folks who can live in them…but like the US there were those investing to “FLIP IT!” I wonder if China had their own version of “HDTV” which sold the idea of “Flip It” to it’s million viewers for years here in the US. (Particularly the young, vulnerable who loved their credit cards and weren’t wary of DEBT like their Parents and Grandparents before them)

    So….now it appears that not only GB but the PIIGS and CANADA have all had HOUSING BUBBLES..(vacation spects) for Europe…but the skyrocketing real estate in GB due to the Russion Barons, etc who were buying up most of London during OUR boom here in US and the Explosion of Ireland with some flow over of outsourcing from US to their and India. And, Ireland could borrow and boom with the rest.

    So…we have massive HDTV…”FLIP THIS HOUSE”…and “SHOP TIL you DROP” all over the world and even in CHINA! (GASP)

    Those damned BANKSTERS really did a NUMBER ON ALL OF US. And years ago many of us worried about “Organized Crime” and “Drug Lords.” It’s gotta be a JOKE! ON ALL OF US! :D

  4. thumbcharts says:

    What surprises me is that the economic numbers published by the Chinese government aren’t discounted completely when evaluating the strength of the economy. The numbers they give us are clearly all that we have to go on but I’ve seen hundreds of articles taking the BLS to task for their birth/death model yet only a few articles analyzing the likelihood that the Chinese economic numbers are anywhere close to reality.

    There are a few folks like Chanos who are calling China out as an Enron-like black box but there should be many more…

  5. speaking of “Official”, we hoot ‘n holler over the Statistics released by the USGov, but, many seem to take the Statistics released by the PROC as ‘es verdad’..

    differently, this topic http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Industrial+Pollution+in+China

    even among the Green-washed, is little understood/gets little play..

  6. call me ahab says:

    what’s cool about China is the incredible clean air and beautiful views-

    trust me- go to Beijing and see the Forbidden Kingdom- after you wipe the tears from your eyes- and squint into the distance you can almost make out a building or two-

    it’s breathtaking

  7. Transor Z says:


    “Attack ad” seems too tame to describe this political ad by Dan Fanelli, the republican (and Tea Partier) challenger vying for FL-8, currently held by Alan Grayson.


    Behold the face of the party of Sara Palin, and may G-d have mercy on our souls.

  8. R. Cain says:

    China’s inflation rate is 2.8%; same as USA/Canada

    ‘April consumer prices rose 2.8 percent from a year earlier, below Beijing’s full-year target of 3 percent.’

    i think Mr Faber is having some fun with this
    sensationalism sells
    and the media buys into it

    he also has a sense of humour, as witnessed by his comment last friday on BNN TV (Canada):
    “Whenever Mr Obama goes on TV, I switch over and watch video of Lady Gaga.”

  9. WolfStreet says:

    CHina’s been that locomotive of the our recovry right ? Well. next stop: OFF rails.

  10. tradeking13 says:

    USA near 52-week highs, China at 52-week lows. Something doesn’t smell right here.

  11. Mike in Nola says:

    Have to admit I’ve never seen Lady Gaga. Guess I’m getting old.

    BTW, to go off topic a bit, Mozilla has published an interesting page that you can visit to check whether your browser plugins, e.g. Flash or Java, are up to date. It works for all browsers. Address is:

  12. Transor Z says:

    China can jack rates with their growth rate and be okay in the long run. Yes, a strong currency impacts exports, but I’d rather be in a position to devalue my currency at will on my own schedule than try to go the other way and convince the world I’m not insolvent when I haven’t got an industrial base/pot to piss in.

  13. reedsch says:

    These are the original herd creatures. The 中国 govt. has to manage the herd…don’t wanna spook the herd, so most bad news is squelched, the story is: sunny and clear sailing, and they’re sticking to it. The herd is not in the stock market, that being some newfangled Western idea, it knows what it can see and touch so the herd in is real estate, which is in your face every day. Smart people make money by getting a bit ahead of the herd, not betting against it. You better hope the herds doesn’t stampede, that would be a one hell of a mess.
    It’s that nexus between the political and economic we’re all trying to navigate at the moment. The subject studied by Ricardo and Smith was called Political Economy: money is power and power is money, the coin of the realm bearing Caesar’s face (or Mao’s or G. Washington’s…but Ben Franklin was never president.) Part of the Founding Father’s grand experiment in democracy was to split the two, but I suspect this is not the natural state of affairs: was that a shotgun wedding in September 2008, or reuniting of two long-separated lovers?

  14. EAR says:

    James Chanos, April 12…

    “Well, they’ve already begun to take some steps. We’re seeing what we call jawboning, some attempts to talk the market down. That’s not having much of an affect according to the prices we’ve seen in
    February and March.

    They’ve also begun to take some steps as requiring higher down payments for second homes. And so we’re seeing some things on the margin.

    But the fact of the matter is the game has to keep going. They’re on this treadmill to hell, as I call it, because so much of their GDP growth is construction — 50 percent to 60 percent of this country’s GDP is construction. We’ve not seen that in terms of a major country I think for a long time if not at all.

    And so for them to get off of stopping construction, you’ll see GDP growth go negative very quickly. That’s not going to happen, because in China it’s all about making the number. People are rewarded at almost every level of government of making their economic growth numbers. The
    easiest way to do that is put up another building.

    So they’re really hooked on this sort of heroine of real estate development to keep the numbers going. It’s not infrastructure. It’s not airports, high-speed rail. There’s some of that. And it’s not experts.
    Exports have been stagnant now for a while. And it’s not the consumer in China, either, despite what people believe. It is construction, real estate construction.”


  15. teraflop says:

    I returned from a trip to China 2 weeks ago. I found it more expensive than my previous visit in 2006 with far more capital deployed. Almost everyone I met has an interest in real estate, including piggy-backing properties such that rents cascade up the chain to pay off the various notes involved.

    As for the equity market, I kid you not, while walking on the vast plaza of the Olympic grounds in Beijing a knick-nack seller (key fobs) was yelling into his cell phone about making a 20,000 remnibi margin payment just before asking if I wanted to buy anything.

    It’s a gold rush out there. And it’s also widely distributed. My tour of the countryside south of Beijing yielded vast and varied commercial developments along the many toll roads.

  16. investorinpa says:

    Once upon a time, the stock market was a place where people with capital went to look for productive activity to invest in – say, a company devoted to making soap flakes, or an underpants factory. Now the market is a robot combat arena where algorithms battle for supremacy of the feedback loops.
    James Howard Kunstler in today’s Daily Reckoning

    That about sums it up for me…

  17. reedsch says:

    Case in point, the Bloomberg article in this posting is blocked here; gotta keep the herd moving forward! I would place a bet on the Chinese consumer though, they are going apeshit especially about consumer electronics, but the prices are so low…and where’s the Apple stuff, VietNam yes, China I haven’t seen it, yet. iPhone in Vietnamese = status, in Asia status is not an option, it is life. It does surprise me in some ways that these developing countries follow the same trajectory as we did, even though they can clearly see the social, economic, and environmental consequences of being ruled by automobiles. Just shows the power of the herd. When I taught in VN I’d ask my students, “who wants to buy a car?” , every hand would go up. Saigon is an urban planning disaster already my dears, so you have your car, where were thinking about driving or parking it? It needs a good sound system, A/C, etc. so you have a nice place to sit, ‘cuz that’s what you’ll be doing most of the time, sitting in it staring at the car in front of you.

    investorinpa: since the robots are making soap and underpants and cars, where are we supposed to get the money to buy them?

  18. Thor says:

    Ahab – That was very clever!

    Agree with many of the bearish comments on China. My only difference is that I think China will play out much later than many people think.

  19. wunsacon says:

    TakBak04, frankly, I read enough “China’s a bubble” talk that — from a contrarian perspective — I don’t know whether to believe it.

    Then again, the “housing is a bubble” meme was well discussed in the blogs. Eventually, it busted. So, maybe it’s finally time.

    Of course, it’s a bubble. When is it time to leave the party? Is it midnite?

  20. Myr says:

    The global financial system is creaking.

  21. TripleB says:

    I also believe that the Short China trade will be a big winner….but it may not happen as soon as everyone thinks. Protect your capital in the meantime.

  22. huxrules says:

    I don’t know. Last weekend a good friend of mine went to Harbor Freight Tools because “everything was so cheap there”. He had just sold his boat and wanted to blow some money like in the good old days. Just think, if we learn Chinese, Harbor Freight will be able to sell us junk tools without the expense of translating the instructions. Then they will be even cheaper!

  23. omgloltrades says:

    Bring on the panda bear puns!

  24. mbelardes says:

    Oh crap! And I just ordered Mandarin from Rosetta Stone. I hope I can return that for … Spanish?

    My money is on China. I’ve seen enough shit shows in The West at this point. The American government can barely agree that the sky is blue. The Europeans can’t agree that the the sky is blue anytime within 12 weeks of the question being presented.

    At least in China I have confidence that they can take one look at a serious problem and pull the trigger on a solution in a span of a few days.

    Bailout. Quantitative Easing. Whatever. They can’t react to a downturn any worse than The West. Seems to me like they have more ammo and more pull to deal with it and less incentive to be nice about it.

    But here comes a double dip recession.

  25. Abhishek says:

    The amount of bad loans made by the Chinese banks and local provincial governments is amazing.They can keep even dead companies alive with these loans which are nothing more than grants done without any due diligence or any conditions.When these “grants” are accounted for as “grants” rather than loans or equity commitments than the shit will hit the fan. China is massively dependent on foreign markets for its employment and GDP.Infrastructure spending to short up the GDP is also a done trade

  26. Simon says:

    If I could I would put 5% of my capital to work shadowing Chanos’s short bet. I’m guessing he’s short overvalued Australian raw materials and infrastructure bonds.

  27. purple says:

    China can’t act as the consumer of last resort, yet. Maybe in the future. The US was able to soak up massive capital inflows in the aughties without inflation, which translated into consumption. China doesn’t have the depth to its markets – esp. treasuries – to handle that yet, so inflation is inevitable. Eventually the world will realize that China can’t replace the US, and is in fact still trying to export capacity.

    The US consumer is still driving way to much of global growth, is leveraging up again, and savings is dropping again. The global imbalances haven’t gone away and we are setting the stage for bigger and bigger crises.

  28. purple says:

    On another note, looking at immigration flows – many many more Chinese are immigrating to the U.S than Americans are immigrating to Asia. Like in the days of the Cold War, people might say one thing but vote with their feet another way. For every Jim Rogers fleeing NYC, there might 10,000 people from China immigrating to the U.S…if there will be an ‘Asian century’ it will be here.

  29. Simon,

    this: “I’m guessing he’s short overvalued Australian raw materials..”, raises an interesting point..


    nothing like a 40% tariff to decrease NPVs..

    w.this: “investorinpa: since the robots are making soap and underpants and cars, where are we supposed to get the money to buy them?”

    How about making, and repairing, the Robots? Or, are those mofo’s self-replicating, already?

    in case you haven’t checked, recently, Laverne & Shirley have better things to do then check bottle caps..

  30. [...] Oh yeah, China is now in a bear market.  (iBankCoin) and (TBP) [...]

  31. PatientCash says:

    Australia is toast.