Reasons to be nervous, or cheerful


Plenty to spook those of a nervous disposition today.

With their stock market continuing to mock the Communist Party’s hitherto unchallenged omnipotence, many patriotic Chinese suspect that the meltdown is the work of George Soros and other hostile foreign manipulators jealous of the country’s rise and determined to crush it out of spite, just like evil foreigners have always done. It is not hard to imagine valiant cyber-warriors of PLA Unit 61398 vengefully hacking critical overseas servers in defence of the nation.

Bloom-NYSEThus yesterday’s mysterious confluence of events. The New York Stock Exchange’s computers failed and brought trading to a halt. United Airlines’ systems collapsed and grounded aircraft and passengers around the world. The Wall Street Journal website crashed, depriving investors of essential financial information. And to cap it all, in Hong Kong, the Mid-Levels Escalator was down between Lyndhurst Terrace and Hollywood Road, leaving the cream of the city’s wealthy and handsome intelligentsia stranded.

Or maybe it’s all coincidence, not conspiracy. Should we fear a country whose leaders seriously imagine that they can tweak the stock market index like the air-conditioning temperature? Let’s think positive…

Beijing’s Wacko Anti-Unreasonable-Plunge Decisive Action du jour: banning directors, bosses and holders of more than 5% of a company’s stock from selling for six months. This is the latest in a long line of daily, ever-more imaginative attempts to prop the market up – cutting interest rates, suspending IPOs, diverting pension funds into the market, bullying brokerages into buying, freezing half the nation’s listings Just Like That, letting margin traders use children as collateral, and so on.

A Bloomberg report in the South China Morning Post describes the anguish being felt by China’s car dealers as buyers postpone purchases, and even risk forfeiting down payments. One auto manufacturer’s representative denounces the stock market as “a meat grinder, shredding money meant for buying cars.”

Note that interesting turn of phrase: money meant for buying cars. Do I detect a hint of extreme bitterness, by any chance? A faint impression of personal, seething resentment at injustice as perceived by those with a well-entrenched sense of entitlement? That money was earmarked for me and no-one else, and now it has evaporated, and I might have to make a living doing something socially useful.

Mmmm. Enjoying this. But wait – there’s more!

The SCMP also talks to a (presumably) French fund manager based in Shanghai whose team had to dip into their own pockets and put RMB500,000 each into their company’s rapidly-shriveling-in-value equities holdings, as a gesture of what I believe the Gallics term solidarité with their friendly local market regulators. “There was an internal debate,” he says, “but as we are in China we had no choice.” That’s right. They can run you over with tanks. Did they forget to mention that?

Back in Hong Kong, the general, if unspoken, feeling is that perhaps we take back all that stuff our bureaucrats were saying about integration with Mainland markets and keep things just the way they were, safely insulated from the craziness of a Communist leadership having a tantrum over the refusal of the laws of gravity to bend to one-party rule. Bargain hunting is pushing the local H Shares back up a bit. And thoughts turn to reasons for optimism. If ‘money meant for buying cars’ has vanished, maybe money meant for coming to Hong Kong and buying tacky designer-label goods, watches, gold trinkets and even Luxury Exclusive Premier-Living Elite Apartments has also disappeared for ever. Clouds, silver linings…


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9 Responses to Reasons to be nervous, or cheerful

  1. Sir Crispin Bentley-Smythe IV says:

    “Mid-Levels Escalator was down between Lyndhurst Terrace and Hollywood Road, leaving the cream of the city’s wealthy and handsome intelligentsia stranded.”

    I almost painted my screen with coffee. Love it.

  2. Joe Blow says:

    …the government will keep the SCI above 3,500 points….

    Why doesn’t the CCP go one step further ?: fix the price of every stock, once and for all. No ups, no downs, no tears.

    A re-invention of the stock market !
    Or: a stock market with Chinese characteristics !

  3. Jason90 says:

    It’s all because of Occupy Central. We were warned it would cause the collapse of civilisation, and now it is…

  4. mjrelje says:

    “The one-month rout is almost equivalent to the annual output of Germany, the world’s fourth-largest economy”. A good start, but we need European proportions not single country losses. I guess the dumb CCP aren’t going to let market forces shape the economy anymore then.

  5. Knownot says:

    Foreign brokers in despair
    Run their fingers through their hair.
    “How can we do business there?”

    Half the stocks have been suspended.
    But Chinese markets always trended
    Up, until the party ended.

    Foreign brokers feel aggrieved.
    They should never have believed.

  6. Scotty Dotty says:

    This 5% thing.

    Right now, owners of such large equity chunks are dividing up their assets with the missus or Uncle Ho. Once below the 5% level they’ll sell like lightning.

    One party dictatorships. Sometimes it’s amazing what they achieve and sometime they’re as dumb as a bunch of rocks.

  7. Not surprised..... says:

    and on top of all this Delaneys in Wan Chai is closing due to rent increases……PRC is screwing everything in HK

  8. Maugrim says:

    Why are so many Chinese stocks suspended? Because they borrowed using their own shares as collateral, and are now facing margin calls.

  9. Monkey Uncensored says:

    Great summary on recent developments in China from David Stockman … some real economics as a counterweight to mainstream media vacuousness.

    @Scotty-Dotty … thanks for the positive feedback on my comment yesterday – in addition to enjoying Hemlock’s acerbic wit and insight, I appreciate the opportunity this blog provides to comment and dialogue with knowledgeable Hong Kong-o-philes who have yet to opportunistically sacrifice their common sense, personal integrity, and basic human decency on the altar of some pseudo-ideology with “Chinese characteristics” (and yes everyday I thank fuck I didn’t grow up in Singapore, where we would be an endangered species… scary to think the CCP covets the Singaporean socioeconomic model for HKG and China).

    Sure up for a beer sometime, I live in self-imposed exile in the big Mango at the mo, but travel to HKG for business fairly often …

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