Bubbles getting bigger around the world, China now has $358 BILLION in Margin loans...just keep pumping the markets up with borrowed money because thats the way to do it....Record margin debt here in the US as well, In April the US had a RECORD $507 BILLION.....now what happens when all the markets at once start to fall and collapse and everyone is forced to sell their shares.....the psychology of this market place only knows one thing...greed.... The other 2, Panic and fear have not made it to the scene just yet, they seem to have been forgotten, lost in this unforgettable bull market, but they soon will be here..... China's $358 Billion in Margin Loans Points to Next Bear Market By Shidong Zhang17 hours ago Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358 billion pile of margin debt. When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the selloff, according to Bocom International Holdings Co. and Rabobank International. Almost all of this year’s biggest declines in the Shanghai Composite Index, including a 6.5 percent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans Friday to limit the amount brokerages can lend for stock trading. “There’s definitely a ceiling on margin-lending,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “Once leveraged investors begin to cut their holdings, it means they’ve turned cautious on the market and that will probably spark a correction.” A pullback by margin traders would undercut one of the biggest drivers of the rally that’s lifted the value of shares to more than $10 trillion for the first time. With so much borrowed money at stake, market downturns run the risk of snowballing as traders are forced to sell shares to meet margin calls, said Anthony Neoh, a visiting professor at the National University of Singapore and member of the Chinese securities regulator’s international advisory body. Previous Routs The Shanghai Composite tumbled on May 28 after a brokerage increased its margin requirements, or the collateral put up by investors when borrowing to buy shares. The gauge plunged 7.7 percent on Jan. 19 after a regulatory suspension on new margin accounts at some of the nation’s biggest securities firms. On both occasions, the index recovered within days as margin loans kept climbing. More from Bloomberg.com: Greece's Last-Ditch Talks Aim at Agreement Before Monday The benchmark stock measure slumped 1.7 percent from its highest level in more than seven years at 11:09 a.m. local time. Hao Hong, the chief China strategist at Bocom International, says policy makers face a choice: enact margin curbs and bring an end to the bull market, or let leverage keep growing and risk an even bigger market crash down the line. They also have to contend with loans that make their way into the stock market through China’s shadow finance sector. “The regulator is trying to slow down the growth without triggering panic,” Hao said from Hong Kong on June 11. “If margin loan growth starts to decelerate notably, the market will slow down. If non-compliant margin lending accounts must be closed, the market will crash.” New Rules The China Securities Regulatory Commission is planning to curb the amount of margin finance and short selling to no more than four times a brokerage’s net capital, according to draft rules posted on its website June 12. There is currently no ceiling. The CSRC is also considering allowing brokerages to roll over margin trading and short-selling contracts, instead of closing them out after six months, which may quell volatility if the rally falters. “Guiding markets like this with regulatory measures is incredibly hard to do,” said Michael Every, the head of financial markets research at Rabobank International in Hong Kong. China’s stock-market tumble of 2008 shows how quickly investor confidence can evaporate, even in the absence of margin calls. The Shanghai Composite fell more than 70 percent in the 10 months ended Nov. 4, 2008, after jumping more than 400 percent in the previous two years. Leveraged investors have made so much money from rising stock prices that it would take a “big market slump” for them to start unwinding positions, said Yuliang Chang, the Hong Kong-based head of Chinese equities at Deutsche Bank AG. “There are ample buffers given how much A shares have rallied,” Chang said. Lose Money Brokerages across China are already tightening requirements for lending to stock investors to try to limit their exposure to any market bust. GF Securities Co., Haitong Securities Co. and Changjiang Securities Co. have all raised margin requirements. For leveraged investors who get caught in the next downturn, the losses may erode their faith in the stock market, said Neoh. “A lot of people will lose money,” he said. “And it would be a long time before they will return to the markets.” More from Bloomberg.com
BTW: XINA50 (SGX FTSE China A50 Index) futures trade on SGX for those sitting patiently. They're also demoninated in USD. http://www.sgx.com/wps/portal/sgxweb/home/products/derivatives/equity/chinaa50
Leverage + Full account gambling = Suicide. Several days ago, some China news disclosed that a Chinese "trader" (gambler) used 4:1 leverage, put 1.6M RMB margin in one crazy stock (so the total capital on the stock is 6.4M). After the stock hit two stop limit (total is around 18% loss). That guy lost all of his money and he committed suicide. That's how bubble works.
SQUOTE="wqking, post: 4137034, member: 482396"]Leverage + Full account gambling = Suicide. Several days ago, some China news disclosed that a Chinese "trader" (gambler) used 4:1 leverage, put 1.6M RMB margin in one crazy stock (so the total capital on the stock is 6.4M). After the stock hit two stop limit (total is around 18% loss). That guy lost all of his money and he committed suicide. That's how bubble works.[/QUOTE] Well, Chinese aplenty pull similar stunts on borrowed money in Macau and now it seems also in other more junket friendly locations. More suicides will follow (I thought they'd been more than one during the last correction actually). The Shenzhen and Shanghai stock exchange might be in for a sharp correction after ramping up over the last year, but imo it won't be enough to stop China being a major player in world economics. The country is very very far from being on its knees, no matter how much S000S wishes otherwise.
4200%%%% in 55 days Yea no bubble... Technology stocks, heavily represented in the Shenzhen index, are especially in demand. (Tech stocks: What could possibly go wrong?) The price of China's highest-flying stock, Beijing Baofeng Technology Co., increased 4,200 percent in the 55 trading days after it went public; on Friday it was valued at 715 times reported earnings. Alibaba's valuation of 55 times earnings looks cowardly by comparison. Companies change their names and rebrand themselves as technology firms -- then watch their valuations soar.
Well, Chinese aplenty pull similar stunts on borrowed money in Macau and now it seems also in other more junket friendly locations. More suicides will follow (I thought they'd been more than one during the last correction actually). The Shenzhen and Shanghai stock exchange might be in for a sharp correction after ramping up over the last year, but imo it won't be enough to stop China being a major player in world economics. The country is very very far from being on its knees, no matter how much S000S wishes otherwise.[/QUOTE] A major player in world economies? Really? I think that time has already ran its course....China gdp is falling and think about it..how many more ghost cities and malls can China build to keep gdp propped up...
China GDP is falling ? oh, ok then. Did you read this on Zerohedge ? As of the ghost towns, yes you like to stress about them, never mind the bustling Chinese megacities flush with cash so overcrowded and booming the government needs to limit drastically new cars ( and locals don't mind paying 2 to 3 times the US price for their imported cars) and where the real estate is higher priced than in most of the western world. Chinese investment and influence overseas increasing, military might increasing, Asian development bank acting as a counterpower to the world bank, yes, Chinese might has run its course. In your wishful eyes.