Chinese Order Torture

Good luck getting trade orders done on the A Shares market in China these days. Last night, they froze half the stocks in an attempt to halt what’s become a rolling 1987-style crash across the country’s stock markets.

WSJ:

The Shanghai Composite fell 5.9% at 3507.19, after losses of as much as 8.2% earlier Wednesday. The index has lost 32.1% since its peak in mid-June. The smaller Shenzhen Composite fell 2.5% at 1884.45, down 40% from its high last month…

Hundreds of Chinese stocks were frozen from trading Wednesday, with 1,287 companies halted. That represents 45.6% of the constituent stocks of the Shanghai Composite and Shenzhen Composite and $2.5 trillion of market capitalization, according to data from FactSet…

China has put an arsenal of measures to work in recent days to stem the selloff that has wiped out roughly $4.1 trillion in value from China’s equities.

What do you mean “arsenal of measures”?

Financial officials from Beijing to Shanghai are running every play in the Greenspan/Bernanke/Yellen book right now. They’ve corralled all the big brokerage firms and organized a fund to buy the dip, like the Wall Street-led bailout of LTCM organized by the Federal Reserve. They’ve enacted a QE of sorts or are strongly hinting at it, a la the Bernanke Fed in 2012. They’re halting stocks like our circuit-breakers do on the NYSE. They’re jawboning in the state-owned media and encouraging investors to remain calm – something Yellen’s been doing at her press conferences since her first FOMC meeting.

There are quota limits of how much stock foreign investors are allowed to buy in markets like Shanghai and Shenzhen, so don’t look to the international asset managers to be able to ride to the rescue. They can buy Hong Kong in size, but that’s about it. Bottom line – the panic has to work itself out on the Chinese mainland amongst the emotional, inexperienced Chinese investment community itself.

Buckle up.

Source:

China Markets Fall Sharply Despite Fresh Help From Beijing (WSJ)