May 30, 2007

FLASH: Communist China now desperately trying to stop their runaway stock market bubble


You wonder if a government can pop bubbles. In the end, what usually pops bubbles is after asset prices become detached from all fundamentals (it's the PE stupid), simply not finding any more suckers. Kind of like the US housing bubble - no more suckers.

This situation in China will be fascinating to watch, and one for the text books one day. And the little guys are gonna get slaughtered. Welcome to capitalism, Comrades.

Chinese Shares Plunge After Government Raises Trading Tax to Cool Market Boom

BEIJING (AP) -- Chinese stocks plunged Wednesday after the government raised a tax on share trades, trying to cool a market boom amid growing concerns about a possible bubble.
The main Shanghai Composite Index tumbled 6.5 percent at 4,071.27 after hitting a record high on Tuesday. The Shenzhen Composite Index for China's smaller second market fell even more, closing down 7.2 percent at 1,199.45.

The declines came after the Finance Ministry tripled the "stamp tax" on stock trades from 0.1 percent to 0.3 percent, effective Wednesday. The ministry was trying to "cool (the) stock market," the official Xinhua News Agency said.

"This policy change reveals the government's concern about a possible stock market bubble," said Citigroup economist Minggao Shen, describing the tax hike as Beijing's first formal move to cool the boom. "The market didn't know what the government was thinking until now."

27 comments:

Anonymous said...

American hedge funds are all over the Chinese stock market with maximum leverage applied thanks to the Yen carry trade.

Anonymous said...

don't they know assests only go up??

Anonymous said...

Awesome!! I have been buying puts on the Shanghai index for a long time. Life is good right now.

Anonymous said...

let's not get all excited now kids. if you recall 3 months ago the same thing happened and within 2 weeks all the losses had been recoevred and then some

Anonymous said...

Let them eat ricecake.

Mort said...

Free markets are not free anywhere. The gubmints make 'em go up, and the gubmints make 'em go down. How much the China markets go down is entirely up to the China PTB, the same way it is everywhere. Buying stocks is betting on what the gubmint will do next.

Anonymous said...

"The declines came after the Finance Ministry tripled the "stamp tax" on stock trades from 0.1 percent to 0.3 percent, effective Wednesday."

Now if the US would only do the same thing to MBSs/CDOs.

Anonymous said...

Hmm, let's see if I understand this... The Europeans and the Chinese understand the negative effect of asset/debt bubbles while our FED fuels them.

Of course we are Americans and we are so much smarter. Maybe that should read ostriches with our head in the sand.

Or just maybe we have devised a clever way to shift the wealth of the many into the hands of a few?

After all isn't that the best way to run an economy into the ground?

keith said...

I don't think tripling the tax will slow down the train much, but it's a start

the higher this goes the farther it'll fall though

Greenspan's "massive correction" call will be right. It's just a matter of when

Area 51 said...

The Chinese rejected capitalism for "long time". Now the inexperienced uneducated newbie shoeshine man is buying stocks. Me love watching the new Chinese depression unfold, long time.....

yuccatree3 said...

American hedge funds are all over the Chinese stock market with maximum leverage applied thanks to the Yen carry trade.
_______________________

+++++This really scares me. It means that when the Chinese stock market sinks, so will ours, eventually....

Anonymous said...

Oh no chinese stocks drop, looks like the end of the world is here. except that US markets are up nicely this afternoon.

face it tin foil hatters, you are wrong. housing isn't crashing, the economy is booming, stock markets are soaring and you are all left behind in your ghetto apartments with your investments earning 5%.

I'd be panicking too if I were you.

Anonymous said...

sooo, 9/11 thinkers are nutty?

weeeellll, how about this from abc:

http://abcnews.go.com/US/story?id=92662

hmmmmm...... think people!!

fatamelican said...

The stamp tax increase is just standard CYA behavior from pols and bureaucrats who lost control of the situation long ago. The parabolic rise and mania brings to mind that dainty Jethro Tull lullaby Locomotive Breath:

In the shuffling madness
of the locomotive breath,
runs the all-time loser,
headlong to his death.
"Oh" He feels the piston scraping --
steam breaking on his brow --
old Charlie stole the handle and
the train it won't stop going --
no way to slow down.

Anonymous said...

"You're taking chances. And your reputation's going down.

Going out in the night-time. You think you make no sound.

But you don't fool me. `Cos I know what you feel.


If you ignore the things I say --
someday soon's gonna find you
`way down on Beggar's Farm."

As Ian Anderson says, we will see all of you down on Beggar's Farm, soon.

Anonymous said...

"Me love you long time...."-from Pricilla, Queen of the Desert

g: meanwhile, back in the ole USA.... said...

ANOTHER Goldman Sachs crony is appointed by Bush.

For those keeping count GS has now taken over the US Treasury, the Fed, the New York Stock Exchange and now the World Bank.

I cannot believe this doesn't raise more red flags. Our country is starting to look like Russia in the 90's. Sheeple ruled by a bunch of oligarchs.

I can only hope that when some massive dislocation in the credit markets occurs the GS cronies are caught by surpise just as much as we are and get hurt proportionally just as badly. wishful thinking.

Batman said...

Of course it's gonna crash, but it will be a hard top to call. When the "greed" phase of the last leg up comes, it is pure gambling of the most unpredictable kind.

I'm not even brave enough to short this knowing the StayPuff Marshmellow man could easily outpuff any puts you lay down. Welcome to Vegas guys.

Adam Smith said...

Keith said:

"Greenspan's "massive correction" call will be right. It's just a matter of when"


Is anyone else thrilled to see that Greenspan CAN recognize a bubble before it collapses? Didn't he say, you don't know a bubble until AFTER it collapsed, or somesuch nonsense?

Because it warms the cockles of my heart to see Alan in his retirement stamping out bubbles in China, when he seemingly spent a career in the U.S. INFLATING bubbles! Hmmm, perhaps his boss actually WANTED him to inflate bubbles to 'save' our economy from recession!? Could it be?

Methinks he's doing self-cleansing and repentence in retirement, seeking redemption and foregiveness for past ill deeds committed that are intrinsically offensive to the god of economics. If not, he'll be going to economists' hell, fo' sho'.

Deputy Dawg said...

Anonymous said...

Let them eat ricecake.


And how exactly would that be different from any other day? I mean, the whole "ramen-eating FB" thing doesn't have quite the same impact, when people are eating it already....

Anonymous said...

ho hum another day another big gain for the dow keep talking about crashes losers

Lost Cause said...

Don't they have a Plunge Protection Team in communist countries, like we do in the Free Market World?

Lost Cause said...

Our country is starting to look like Russia in the 90's. Sheeple ruled by a bunch of oligarchs.


A very astute observation. We are yet again two sides of the same coin. If you want to understand what is going on in this country, look at Russia. There are too many lies in the media here to get a clear picture. We do not live in a vacuum. This is happening on a global scale. We are not immune.

Anonymous said...

'DETENTION CAMPS' BEING BUILT THRU OUT THE USA

http://wnd.com/news/article.asp?ARTICLE_ID=55923

haliburton sub got the contract

run a headline on this blog about this.

Budvar said...

"ho hum another day another big gain for the dow keep talking about crashes losers"

"face it tin foil hatters, you are wrong. housing isn't crashing, the economy is booming, stock markets are soaring and you are all left behind in your ghetto apartments with your investments earning 5%"

The fuckwittery of the anons is beyond belief!!
The economist Irving Fisher in 1929 said
"Stock prices have reached what looks like a permanently high plateau" and "the market was only shaking out of the lunatic fringe" He continued to believe this even after he lost every last dime of his and that of his investors.

Anonymous said...

The free media like CNN, ABC, NY Times, LA Times, CBS, NBC, AP, Reuters etc etc etc

nelson said...

US stock markets are up while homedebtors and broke-ass realtors have no money to invest. HAHAHAHA