CLIENT LOGIN
-
-
CIO INSIGHTS
-
BACK TO CIO INSIGHTS
BACK TO ARTICLES & INSIGHTS HOME
-
-
-
-
Investment Insights are written by
Angeles' CIO Michael Rosen
Michael has more than 30 years experience as an institutional portfolio manager, investment strategist, trader and academic.
IM电竞app官方入口
Published: 07-13-2015The central planners in Beijing have gotten so much right for the past three decades, that they might be forgiven for believing in their own infallibility. But it’s one thing to shuffle resources around an economy—a road here, an airport there—and quite another thing to dictate supply and demand in a large market. John Major learned the folly of fighting markets in 1992, and there have countless similar experiences both before and since.
Apparently confusing a healthy stock market with a healthy economy, the political powers in China decreed that stock prices should rise, directing banks and other lenders to lend freely to speculators. Margin loans on the “A” share market rose to $371 billion by mid-June, about 10% of the free-float market capitalization. By contrast, margin loans at the NYSE are around $500 billion, or 3% of the NYSE market capitalization. And that’s a record high in New York.
So the astute planners in Beijing decreed that margin lending had gotten ahead of itself, and shut off the spigot. As of last week, margin loans had fallen nearly 40%, to $238 billion, still about 8% of the capitalization of the A-shares market. The market itself fell more than 30%, and on Thursday of last week, the bureaucrats stepped in again to say that was enough, the market should stop falling. The chart below illustrates the extraordinary effect these decrees had on a daily basis. On Tuesday and Wednesday last week, most stocks were either limit-down or simply suspended from trading (91% on Tuesday, 80% on Wednesday), but then on Thursday 51% of stocks traded limit-up.
This is a crazy way to run a market (the oxymoron is not lost: market prices are not “run,” they reflect supply and demand forces). Still, I have some empathy for the bureaucrats. Setting reasonable rules and regulations and then stepping aside must be really hard to do. But they are learning that the alternative—decreeing the daily direction of markets—is even harder.
PRINT THIS ARTICLE-
Plunging 07-24-2015
Commodity prices are in free fall. The Bloomberg Commodity Price Index (5-year chart below) is off about 30% in the last ...
READ MORE -
Labor Market 12-05-2014
Oh, this was a strong report this morning, on every level:321,000 net new jobs in November.10 consecutive months of ...
READ MORE -
Criminals in Diapers 08-05-2015
Japan grew from the (literal) ashes of the Second World War to become the second largest economy in the world by ...
READ MORE
-
-
SUBSCRIBE TO ANGELES' INSIGHTS
Get the latest investment information and stay on top of market trends.
-
SANTA MONICA
555 SANTA MONICA BLVD
SUITE 650
SANTA MONICA, CA 90401
310.393.0000
GET DIRECTIONS -
CONTACT US
NEW YORK
333 PARK AVENUE
SUITE 2209
NEW YORK, NY 10152
212.451.9999
GET DIRECTIONS -
CHICAGO
444 D. MICHIGAN AVE
SUITE S1700
CHICAGO, IL 60611
312.212.6666
GET DIRECTIONS