Spamdex - Spam Archive

Report spam

Send in your spam and get the offenders listed

Create a rule in outlook or simply forward the spam you receive to

Also in

China: Risks and Opportunities

Having trouble viewing this email? View it online.
Thursday, July 9, 2015 Money and Markets
China: Risks ... and Opportunities
by Mike Burnick

Dear ,

Mike Burnick

Global investors have been fixated on the Greek debt drama in recent weeks, and rightly so, but another drama is heightening on the other side of the world. China's stock market is crashing.

The meltdown in Chinese stocks presents both risk of contagion for global stocks, including our markets, and a great buying opportunity in the making for global-oriented investors.

China's mainland Shanghai Index soared 150% higher in just 12 months through mid-June. These eye-popping gains were fueled in large part by a massive expansion in margin lending, most of it off-the-books.

A few weeks ago, officials in Beijing believed stocks could be getting overheated and decided to crack down on margin trading. Since then, Shanghai shares have plunged about 30% and have been down 13 straight days. The China stock market meltdown has accelerated in spite of Beijing reversing course and pulling out all the stops this week in an attempt to support share prices.

To better understand the magnitude of the price swings in China, just take a closer look at the magnitude of money at work.

Click image for larger view

Official margin lending in China rose to a record 2.3 trillion yuan ($350 billion) as of mid-June. Margin debt is up 123% year to date, and has grown five-fold in the past 12 months alone. But the official data is just the tip of the iceberg.

The Chinese are an enterprising people, with a thriving shadow banking business including off-the-books margin lending where brokerage accounts can be leveraged up 5-to-1 or more.

Avoid Losses and Grow Your Wealth!

Mike Larson wants to help you shield your wealth against major market reversals by identifying major dangers on the horizon. He also wants to help you avoid losses by identifying stocks that are simply too risky for you. To get everything you need to safely grow your wealth today, click here!

Internal Sponsorship

Add in the shadow margin lending to the official numbers, and Chinese mainland stocks bought with borrowed funds account for 8.5% of China's entire free-float market capitalization, according to global investment firm Macquarie Capital — higher than any historical example the firm could find. By contrast, margin lending accounts for only 2% of U.S. stock market value.

On Saturday, June 13, the China Securities Regulatory Commission (CSRC) cracked down, issuing rules forbidding shadow margin lending. Sure enough, Chinese stocks began tumbling Monday, June 15, and continue to plunge.

With Shanghai shares still falling last week, Beijing decided to reverse field, directing the CSRC to "uphold market stability" by providing liquidity to the market, banning IPOs and restricting short selling.

Regulators also announced a 120 billion yuan investment fund that 21 brokerages are launching to directly buy shares. The Chinese press, which is to say Beijing, hinted that the stock market intervention could rise to 1 trillion yuan.

The Shanghai Composite opened nearly 8% higher Monday thanks to the intervention news, but the rise was met with selling and the index closed up just 2.4%, then the plunge quickly resumed as investors lost confidence that Beijing can halt the slide.

There are eerie similarities between Shanghai today and Wall Street in 1929. Eighty-six years ago, five of America's most powerful financiers, led by J.P. Morgan, met in a smoke-filled room at 23 Wall Street to prop up the market after Black Thursday.

Click image for larger view

Initially, the plan sparked a recovery, and The New York Times reported a success in putting a floor under share prices. But it didn't last, with the Dow plunging 34% lower over the next three weeks. Perhaps Beijing will ultimately be more successful today than Wall Street bankers in 1929, but so far the selling in China continues.

The selloff in Shanghai has so far wiped out more than $4 trillion in value from Chinese stocks, equivalent to more than one-third of China's annual GDP! Yesterday, half the stocks listed in Shanghai and China's Shenzhen markets were halted for trading.

But make no mistake, Beijing has a powerful arsenal of tools, including a war chest of currency reserves, at its disposal. This is still a command economy, after all. And volatile swings — both up and down — in Chinese stocks are nothing new.

Beijing has always been wary about speculation leading to unsustainably high stock prices, which is precisely why it acted last month to cool things down. Now realizing they may have overdone it, regulators are quickly moving to cut interest rates and ease lending requirements. As China transitions toward a consumer-led economy, a healthy stock market is a key requirement.

In addition to mainland brokers pledging billions to support stock prices, Beijing can also turn to wealthy Hong Kong investors and institutions to buy with government guarantees and there have been credible rumors of such arrangements.

For this reason, it seems to me the crash-analogy that fits Shanghai best today isn't 1929, but 1987. The Dow lost one-fourth of its market value in just over a month, but within two years, stocks were again making new highs.

Investing in Chinese stocks is not for the faint of heart. Even China tracking ETFs have been clocked over the past several weeks. The DB X Trackers Harvest CSI China A Share ETF (ASHR), one of the largest tracking mainland shares, has plunged 32% since June 1.

Hong Kong shares have held (on the downside) relatively better than Shanghai, and for my money, this remains the preferred buying opportunity if you're investing in China. The iShares China 25 Large Cap ETF (FXI) of Hong Kong listed shares is down 18.7% over the same period.

The selloff in Chinese shares is bringing market valuations back into the bargain range again, at least in Hong Kong. While the median price-to-earnings ratio in China has dropped to 53 from 108 at the height of the rally, valuations are still more than twice as high as the S&P 500 Index. Hong Kong looks far more attractive today — the China Enterprises Index is trading at just 8.6 times earnings, among the cheapest market in the entire world.

Good investing,

Mike Burnick

The investment strategy and opinions expressed in this article are those of the author's and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

Have comments? Tell Us!

Facebook Twitter Linkedin YouTube Pinterest

About Money and Markets
For more information and archived issues, visit
Money and Markets is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our Terms and Conditions. View our Privacy Policy. Would you like to unsubscribe from our mailing list? To make sure you don't miss our urgent updates, just follow these simple steps to add Weiss Research to your address book.

Attention editors and publishers! Money and Markets teaser content may be republished with a link to the full story on Such republication must include attribution with a link to the MoneyandMarkets home page as follows: "Source:"

Money and Markets: A Division of Weiss Research, Inc. |

4400 Northcorp Parkway | Palm Beach Gardens, FL 33410 | 1-800-393-0189


All titles, content, publisher names, trademarks, artwork, and associated imagery are trademarks and/or copyright material of their respective owners. All rights reserved. The Spam Archive website contains material for general information purposes only. It has been written for the purpose of providing information and historical reference containing in the main instances of business or commercial spam.

Many of the messages in Spamdex's archive contain forged headers in one form or another. The fact that an email claims to have come from one email address or another does not mean it actually originated at that address! Please use spamdex responsibly.

Yes YOU! Get INVOLVED - Send in your spam and report offenders

Create a rule in outlook or simply forward the junk email you receive to | See contributors

Google + Spam 2010- 2017 Spamdex - The Spam Archive for the internet. unsolicited electric messages (spam) archived for posterity. Link to us and help promote Spamdex as a means of forcing Spammers to re-think the amount of spam they send us.

The Spam Archive - Chronicling spam emails into readable web records index for all time

Please contact us with any comments or questions at Spam Archive is a non-profit library of thousands of spam email messages sent to a single email address. A number of far-sighted people have been saving all their spam and have put it online. This is a valuable resource for anyone writing Bayesian filters. The Spam Archive is building a digital library of Internet spam. Your use of the Archive is subject to the Archive's Terms of Use. All emails viewed are copyright of the respected companies or corporations. Thanks to Benedict Sykes for assisting with tech problems and Google Indexing, ta Ben.

Our inspiration is the "Internet Archive" USA. "Libraries exist to preserve society's cultural artefacts and to provide access to them. If libraries are to continue to foster education and scholarship in this era of digital technology, it's essential for them to extend those functions into the digital world." This is our library of unsolicited emails from around the world. See Spamdex is in no way associated though. Supporters and members of Helping rid the internet of spam, one email at a time. Working with Inernet Aware to improve user knowlegde on keeping safe online. Many thanks to all our supporters including Vanilla Circus for providing SEO advice and other content syndication help | Link to us | Terms | Privacy | Cookies | Complaints | Copyright | Spam emails / ICO | Spam images | Sitemap | All hosting and cloud migration by Cloudworks.

Important: Users take note, this is Spamdex - The Spam Archive for the internet. Some of the pages indexed could contain offensive language or contain fraudulent offers. If an offer looks too good to be true it probably is! Please tread, carefully, all of the links should be fine. Clicking I agree means you agree to our terms and conditions. We cannot be held responsible etc etc.

The Spam Archive - Chronicling spam emails into readable web records

The Glass House | London | SW19 8AE |
Spamdex is a digital archive of unsolicited electronic mail 4.9 out of 5 based on reviews
Spamdex - The Spam Archive Located in London, SW19 8AE. Phone: 08000 0514541.