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Quite a hit to Elizabeth Holmes' reputation
I'm aware this issue has been addressed here. This reinforces, perhaps
Oct 15 (Reuters) - Personal injury law firms around the United States are lining up plaintiffs for what they say could be "mass tort" actions against agrichemical giant Monsanto Co that claim the company's Roundup herbicide has caused cancer in farm workers and others exposed to the chemical.
The latest lawsuit was filed Wednesday in Delaware Superior Court by three law firms representing three plaintiffs.
The lawsuit is similar to others filed last month in New York and California accusing Monsanto of long knowing that the main ingredient in Roundup, glyphosate, was hazardous to human health. Monsanto "led a prolonged campaign of misinformation to convince government agencies, farmers and the general population that Roundup was safe," the lawsuit states.
The litigation follows the World Health Organization's declaration in March that there was sufficient evidence to classify glyphosate as "probably carcinogenic to humans."
"We can prove that Monsanto knew about the dangers of glyphosate," said Michael McDivitt, whose Colorado-based law firm is putting together cases for 50 individuals. "There are a lot of studies showing glyphosate causes these cancers."<snip>
This can't be good.
FT
Market concerns are rising over divisions at the top of the Federal Reserve on when to lift interest rates, casting fresh uncertainty over the US central bank’s strategy for withdrawing its monetary stimulus.
The divisions burst into the open when two Fed board members signalled this week that they oppose a near-term increase in interest rates, questioning the approach adopted by chair Janet Yellen amid divisions over the outlook for inflation.
Larry Fink, chief executive of the world’s largest asset manager, BlackRock, warned on Wednesday that ”mixed messages” from officials were contributing to volatility and “inflaming the markets”.
A disappointing US retail sales report on Wednesday, showing headline sales rose just 0.1 per cent in August, further damped traders’ expectations of an early rate rise. By Wednesday afternoon in New York, Fed Funds futures were pointing to a greater than 50% chance that the Fed would wait until after March 2016 to raise rates.
The figures sent the 10-year Treasury yield back below 2 per cent, down more than 6 basis points to 1.98.
Daniel Tarullo said in a CNBC interview on Tuesday that his current expectation was that it was not appropriate to raise rates this year, joining fellow governor Lael Brainard in favouring a wait-and-see approach.
Roberto Perli of Cornerstone Macro said differences of opinion between regional Fed presidents were not uncommon, “but the novelty here is that both Tarullo and Brainard are members of the Fed’s Board of Governors and as such supposedly close to Yellen”.
Both policymakers appeared to raise doubts about an assumption underpinning Ms Yellen’s policymaking approach — namely, that as the US approaches full employment, inflation will start accelerating, according to the so-called Phillips curve.
Mr Perli added: “The fact that they essentially called into question Yellen’s speech where she made the case for lift-off this year is remarkable and plunges Fed communication back into confusion after Yellen tried to set things straight a few weeks ago.”
Renewed uncertainty over the Fed’s intentions will do little to allay concerns in emerging markets, where policymakers have become frustrated by its apparent indecision on when to raise dollar borrowing costs. A further delay would also add to pressure on the European Central Bank and Bank of Japan to offset a weaker dollar with additional quantitative easing of their own.
Moody’s senior economist Ryan Sweet said the “discordant” rhetoric was significant. “Yellen has time to forge a consensus but airing the officials’ disagreements publicly can have unintended consequences,” he wrote. <snip>
FT
Eli Lilly shares are sinking fast on Monday.
The stock of the US drugmaker is down almost 10 per cent in pre-market trading after the company said it would abandon a late stage trial of a medicine aimed at treating heart disease.
Lilly said it made the decision on the basis of advice from an independent data monitoring committee, which judged that the drug, known as evacetrapib, lacked efficacy.
As a result, Lilly will take a charge of up to $90m, or about 5 cents a share, in its fourth-quarter results.
Derica Rice, Lilly's chief financial officer, said:
This unfortunate outcome for evacetrapib does not change our ability to generate long-term growth.
Lilly's shares were down $7.89, or 9.2 per cent, at pixel time. They are up 25 per cent this year.
price = 5.84, NOT
the productivity of existing wells continues to be surprisingly good.
As I remember, that was not supposed to happen
Procrastination is always the comforting solution.
IMF warns of coming spike in emerging market company failures FT
Shawn Donnan in Washington
©Reuters
The International Monetary Fund has warned that emerging economies and bond markets need to prepare for an increase in corporate failures if and when the US Federal Reserve and other central banks in advanced economies begin raising rates.
The IMF, which has urged the Fed to wait until next year to raise rates for the first time in almost a decade, and others have expressed growing concern about the surge in dollar-denominated debt in emerging economies and the potential impact that a sudden increase in rates would have. The issue is likely to be among the most discussed when central bankers and finance ministers from around the world convene for next week’s annual meetings of the IMF and World Bank in Lima, Peru.
In a chapter of its Global Financial Stability Report prepared for those meetings and released on Tuesday, IMF economists warn that a surge in corporate leverage has preceded many emerging market financial crises in history.
Fed by the cheap cost of money, over the past decade the corporate debt of non-financial firms across major emerging market economies more than quadrupled from $4tn in 2004 to more than $18tn in 2014. In the same period, the average ratio of emerging market corporate debt to gross domestic product grew by 26 percentage points, the IMF said.
Although by some other measures those corporate debt levels remained below historical peaks, the prospect of an increase in rates and debt servicing costs meant that the looming end of a post-crisis era of cheap money posed a “a key risk for the emerging market corporate sector”, the IMF said.
That in turn posed a broader threat for emerging economies.
“As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures and, where needed, reform corporate insolvency regimes,” IMF economists wrote.
Among the IMF’s concerns is the significant share of emerging market banks’ assets now tied up in corporate debt. That means any shocks to the corporate sector could quickly spill over to banks and cause them to stop lending, in what would be another drag to the already slowing growth in many emerging economies.
A growing portion of corporate debt in emerging economies also trades in the bond market, the IMF said. In 2004 just 9 per cent of the total corporate debt in emerging economies was made up of bonds. That figure had almost doubled to 17 per cent in 2014.
What is unclear, the IMF said, is how active companies have been in hedging their exposure to foreign exchange swings, such as a stronger dollar.
But it also warned that as the main reason for the surge in corporate debt had been “external factors”, less attention had been paid to the risks posed by individual countries or companies in recent years. As a result “markets may have been underestimating risks”.
The IMF said: “If rising leverage and issuance have recently been predominantly influenced by external factors, then firms are rendered more vulnerable to a tightening of global financial conditions.”
Never quite understood how shorts can keep the share price down while covering, unless they have magical powers.
Never understood the utility of pushing the EU ever eastward, except piss off the Russians.
A lot of people are invested in proving the Chinese expansion never took place. This is a countercry from the Guardian.
The bears, it goes without saying, have a dreadful record. After 35 years of extraordinary economic growth, China is still growing at 7% annually. True, that is lower than before, but still at a rate that dwarfs anything in the west.
One of the great weaknesses of so much western economic commentary is that it fails to look much beyond the next quarter’s, or even month’s, results. In contrast the Chinese understand where they have come from, where they are and where they need to go. Nor are they complacent: the Chinese leadership readily admits it faces quite new economic challenges.
It is instructive then to look at China’s global role since the financial crisis. When the western economies were on their knees in 2007-08, the Chinese economy rode to the rescue. Although the actions of the Beijing government were primarily motivated by self-interest – avoiding being dragged down by the crisis – they also had the effect of saving the western economies from a fate far worse.
Confronted by the near-collapse of their western markets, which accounted for around half of Chinese exports at the time, China embarked on a huge $586bn stimulus programme to boost domestic demand and offset the loss in demand for their exports. It worked. The Chinese growth rate continued to expand at around 10% and thereby provided a major boost to the global economy.
Furthermore, following those dark days, the Chinese have allowed their currency, the renminbi, to steadily appreciate, by more than 25% against the dollar since 2005 and considerably more against most other currencies. As a result Chinese exports have become considerably less competitive and have fallen. Meanwhile its current account surplus has dropped dramatically, from 10.1% of GDP in 2007 to 2.1% last year. Imagine the effect on other economies if the opposite had happened and the renminbi had been devalued by 25%.
The growing importance of the Chinese economy for the health of the global economy is illustrated by the fact that America’s GDP has grown by just over 10% since 2008, while over the same period China’s has increased by about 66%.
The western world continues to depend on a life-support system, namely zero interest rates, combined with Chinese growth
That said, the Chinese readily accept that the stimulus programme has led to a multitude of acute problems: chronic over-investment in industries responsible for infrastructure, excessive debt, a property market overhang and growing financial problems in local government.
They are also deeply aware that the stimulus has served to delay the most urgent economic challenge of all: a structural shift in the Chinese economy. As a result, Beijing has found itself fighting on two very different fronts at the same time: the severe short-term problems posed by the stimulus programme and the long-term imperative of a structural shift.
The rebalancing of the Chinese economy is making surprisingly rapid progress. In 2014, the share of services in China’s GDP was 48.2%, comfortably ahead of the 42.6% accounted for by manufacturing and construction, with the gap steadily widening. Despite the fall in the growth rate to around 7%, employment has remained buoyant: the reason is that the service sector absorbs relatively more people than manufacturing, since it is more labour-intensive, together with the fact that the working age population is declining annually by 3 million.
There is also now much evidence that the Chinese economy is becoming increasingly innovative. Online shopping, led by Alibaba, already accounts for more than 10% of retail sales and is growing at 40% per annum. China’s express delivery and internet financial services are world-class and in sectors such as advanced machinery equipment, electrical machinery and smartphones Chinese firms are rapidly catching up with the global leaders: Xiaomi, for instance, is now selling more smartphones in China than Apple. Nor should we ignore China’s energy revolution: wind, water and solar power now account for nearly a third of its total electricity generation capacity, a remarkable achievement.
China plans stock market 'circuit breaker' to curb volatility
Read more
The western preoccupation with headline GDP figures overlooks this deeper structural shift. Ultimately it is the ability of the Chinese economy to make the transition from a labour-intensive, investment-led, export-oriented economy to one based on value-added production and domestic consumption that will be crucial to its long-term future.
This, however, should not deflect attention from the short-term risks. China’s chronic debt problem – partly corporate (especially in infrastructural-related industries, such as steel, that have 30-40% excess capacity); partly property (the result of an explosion in construction, with many buildings remaining empty); partly financial (the growing inability of borrowers to pay back their debts, especially in the shadow banking sector) – could lead to a massive deleveraging and consequent economic contraction.
One of the great problems facing the Chinese leadership is that it is facing several serious challenges all at the same time. If it backtracks on restructuring and rebalancing to provide short-term economic stimulus and shore up the growth rate, this will only store up much more serious problems for the future. If it mishandles the debt problem China could conceivably have the hard landing that it has so skilfully avoided over the last few decades. In short, the new Chinese leadership is confronted with serious overload. Add to this China’s enormously ambitious infrastructure project, One Belt One Road, America’s blatant attempt to contain China and China’s more assertive foreign policy, especially in east Asia, and the danger of over-reach becomes apparent.
China’s leadership, unsurprisingly given the circumstances, has made one serious error: its ill-conceived and mistaken intervention to try to reverse the sell-off on the Shanghai Stock Exchange, from which it now appears to have largely backtracked. In the event, however, it was the resulting plunge in western markets that was far more revealing and significant. Its message was threefold. First, the west is concerned about the state of China’s economy. Second, it was a dramatic illustration of just how important China now is to the global economy, in many ways greater than the US. Even five years ago such an event would have been unimaginable: China has arrived big time. And third, it reminded everyone of the underlying fragility of the western economy, the fact that it has never recovered from the financial crisis, that the latter ushered in a new era of what Larry Summers has called secular stagnation.
The western world continues to depend on a life-support system, namely zero interest rates, combined with Chinese growth. What if the latter falters? That is why western markets have suddenly started panicking. In Beijing, there is concern, not panic. Their challenges seem manageable in comparison.
Oddest thing I've seen this year.
Closing Price above/below 50 Day Moving Average
Okay,which?
I don't post here at all often, but have to say that if the shorts are reduced to offering such patent nonsense, the prospects for ARIA are bright indeed.
$3, when there is a live offer in the $10 range?
Suddenly got a lot easier.
It seems harry crumb has mastered the art of successfully managing a position in ARIA. Personally I find it challenging.
Good for him.
I don't disagree with that, sorry if I gave opposite impression. What I think is an important takeaway is:
But there are specific reasons for the timing of this latest Chinese move. One runs counter to a commonly held assumption in the United States: that China has been manipulating its currency by making it artificially cheap. The markets have been saying that the opposite is true — that the renminbi was, and still is, not cheap enough.
Schumer to the contrary, needless to say
I’m haven’t added HES shares recently and I don’t intend to in the near future.
Wise man.
FT
You create a drug that cures a hitherto difficult and expensive-to-treat killer disease. How much should you charge for your invention?
Do you price it at a level linked in some way to the cost of development and manufacture? Or should you mark it up for the “value” you believe you are offering the patient — even if that far exceeds what the market may be able to bear?
The drugs industry has little difficulty answering this question. Increasingly it opts aggressively for the value-based approach.
Perhaps the best example is Sovaldi, a recently launched blockbusting treatment for the potentially fatal liver-wasting virus, hepatitis C. Unlike previous drugs, which have nasty side effects and cure only one-third of patients, it eliminates the virus in about 95 per cent of those who take a largely uneventful 12-week regimen.
The snag is the cost. Sovaldi’s manufacturer, Gilead Sciences, has set a list price for that regimen of $84,000. The company says this is justified because it compares favourably with the cost of liver transplants for patients whose condition has degenerated into cirrhosis. But this is a last-ditch treatment applying to only a minority of cases.
More than 3m Americans suffer from hepatitis C, out of an estimated 150m worldwide. Just treating those US patients would cost almost $300bn — a budget-busting sum for creaking healthcare systems.
Sovaldi’s price has of course thrilled Wall Street, and Gilead is now valued at $170bn: more than Merck, the world’s fifth-largest pharmaceutical company by sales. But it has incurred considerable odium among the healthcare systems that must pay. Medicare and Medicaid, two US public insurance programmes, stumped up $6bn for Sovaldi last year (out of the drug’s total $12bn of sales worldwide). The latter now says it has no option but to ration access to the most serious sufferers.
Medicaid’s boss, Jeff Myers, compares Gilead’s conduct unfavourably with those of past drug inventors. “If Jonas Salk had priced the polio vaccine like Gilead, we’d still have polio,” he grumbles. The economist Jeffrey Sachs is even more scathing: “Gilead’s mark-up over costs may be close to 1,000-to-1, probably a world record.”
I snipped too early
The IMF set the stage for Beijing’s currency policy shift by warning Chinese authorities in May that it was becoming ‘increasingly critical’ for Beijing to allow its currency to trade more freely, according to an IMF report.
The importance of investment explains why data released last week will keep Premier Li Keqiang awake at night. Fixed-asset investment grew at its slowest pace since 2000 in the first seven months of 2015, led by a collapse in property investment. Factory output in July was also barely above the four-year low touched in March.
“China economic data for July may have lacked the lethal explosive force of last night’s detonation in the industrial city of Tianjin, but it laid bare the wider deterioration of domestic macroeconomic conditions,” Chen Long, China economist at Gavekal Dragonomics, a Beijing-based macroeconomic research firm, wrote last week.
Though property sales have begun to inch up following 13 consecutive months of decline, the market remains saddled with a huge overhang of unsold flats. That has caused developers to pull back on new construction, hitting demand for basic materials such as steel and cement. Faced with this slowdown, factories that produce these commodities are cutting back both on current output and investment in new capacity.
China economy
Even more distressing are signs that the production slowdown may finally be feeding through to the labour market.
China’s leaders are sensitive to the risk of social instability from a spike in idle workers, but they have so far been willing to tolerate four consecutive years of economic deceleration because unemployment remained low. That may now be changing.
China’s official unemployment rate is widely dismissed as unreliable, but an index of labour demand based on proprietary survey data from FT Confidential, a research service of the Financial Times, shows labour demand contracting in July for the first time since 2012. The index hit 49.3 last month, down from an average of 67.8 in the first six months. A reading below 50 indicates falling demand for workers.
China economy
Mr Li has repeatedly said China will not resort to heavy-handed stimulus that would boost short-term growth but exacerbate problems with excess debt and industrial overcapacity. Instead, the leadership wants structural reforms to promote a new growth model that relies more on consumption and services.
Sticking to that pledge means enduring the pain of an investment slowdown, as smokestack industries that thrived under the old model gradually give way to emerging industries such as healthcare, education, tourism, and information technology.
So far the government has employed targeted stimulus in the form of fiscal spending on infrastructure, while resisting pressure to unleash a wave of lending from commercial banks to the manufacturing sector, as in 2008. That stimulus plan led to a quadrupling of China’s economy-wide debt from $7tn in 2007 to $28tn by mid-2014, equivalent to 282 per cent of GDP. But if the job market continues to worsen, pressure for drastic measures will increase.
China economy
The wild card is deflation. Wholesale prices have fallen for 40 consecutive months, with the decline accelerating in July. Falling global commodity prices are largely to blame for Chinese deflation, but that is cold comfort for indebted companies whose nominal cash flows are in decline, even as the debt they owe remains fixed.
In an illustration deflation is undermining deleveraging efforts, China’s debt-to-GDP ratio has continued to rise this year, even as new borrowing fell 21 per cent in the first seven months from the year-earlier period. That is because disinflation has caused nominal GDP to slow even more sharply than outstanding debt.
Tao Wang, chief China economist at UBS, said: “Clearly, the overwhelming problem for China remains one of rising deflationary pressures.”
Twitter: @gabewildau
Snippet from a very bearish FT article.
The sudden fall in China’s currency last week spurred a lively debate about whether the move was a victory for market reform or a competitive devaluation designed to shore up flagging exports.
But even those who believe the 3 per cent drop was aimed at exporters acknowledge that a weaker renminbi by itself is radically insufficient to cope with the challenges facing China’s economy.
“Currency depreciation to stimulate export growth is neither useful nor necessary,” said Qu Hongbin, HSBC chief China economist. He notes that while China’s exports have fallen this year, “exporters across Asia faced the same challenge, suggesting that the underlying problem is sluggish demand in developed markets.”
China’s economy officially grew at an annual rate of 7 per cent during the first half of this year, neatly in line with the government’s full-year target. However, some doubt that figure and all agree that further stimulus will be needed to prevent a slowdown.
Yet an export revival would boost growth only marginally. Contrary to received wisdom, China has not pursued so-called “export-led growth” for the past decade. Net exports subtracted 3 per cent from annual growth in Chinese gross domestic product on average from 2004 to 2014. Meanwhile, investment contributed an average of 52 per cent of growth each year.
May be time to look at oils again. Are you still well disposed toward HES?
Actual short squeezes are once-a-year affairs
Numerous boards base their optimism on an impending short squeeze that never seems to happen.
The case at issue was insider trading, not manipulation. Insider trading is indeed pervasive and damaging.
The longer it stays at the top of the snake without compensating intervention, the more it looks like a devaluation.
Maybe, but the line of least resistance is in the direction of a cheaper RMB.
WSJ
Beijing’s delicate currency adjustment leaves a great deal of room for things to go wrong
Shockwaves from China’s yuan devaluation will be felt by all kinds of investors, and will likely prompt questions from U.S. politicians. Heard on the Street’s Aaron Back and Abheek Bhattacharya discuss. Photo: Reuters
Aaron Back
Aug. 11, 2015 1:41 a.m. ET
2 COMMENTS
Beijing is hoping that a more flexible currency will help stabilize China’s sputtering economy. But this monetary high-wire act carries enormous risk.
In a shock move, China on Tuesday set the yuan’s central parity, the rate around which it is permitted to trade against the U.S. dollar, 2% lower. The People’s Bank of China also said it will base the daily rate more on market conditions, a heavy hint that the currency will be allowed to fall further.
This will take some pressure off Chinese exporters. The yuan has been basically fixed against the U.S. dollar since March, but it has appreciated against other global currencies, eroding competitiveness.
Chinese imports have been even weaker than exports, though, largely due to falling commodity prices. As a result, China’s trade surplus in the first seven months of the year actually doubled, to $306 billion. This suggests the trade balance wasn’t the primary motive for the currency move.
Rather, a more flexible exchange rate seems intended to solve a classic monetary-policy dilemma. To restore a weakening economy, China has been easing, cutting benchmark interest rates four times since November. This has lowered the return on yuan assets relative to other currencies, pushing investment money out of China.
In the first half of the year, China had net capital outflows of $162 billion, according to its official balance-of-payments data, though some economists figure the true number is higher. The PBOC has been injecting money into the system, but the capital leakage dilutes the effectiveness of its easing measures. Defending the currency also means spending foreign-exchange reserves. With the Federal Reserve likely to start raising interest rates this year, this situation is only set to intensify.
In theory, the dilemma can be resolved by letting the yuan depreciate to a low enough level that it entices money back into China. But Beijing’s long-standing preference for gradualism means it is unlikely to allow the currency to adjust so quickly. Rapid depreciation would also risk a wave of defaults on Chinese companies’ dollar-denominated debts, which Daiwa economist Kevin Lai estimates could be as high as $3 trillion.
Dragging out the adjustment also carries risks, though. If the yuan is expected to keep depreciating over time, it will only further encourage capital outflows. In its statement, the PBOC hinted that it will crack down on “suspicious cross-border capital flow.” But China’s controls today are too porous to stop large volumes of capital from going where it wants.
Markets will now have to sort out the winners and losers from China’s new currency policy. A weakening yuan will most obviously be negative for anyone dependent on exporting to China. This includes commodity and energy producers, as well airlines, hotels and retail outlets that have benefited from the surge of Chinese outbound tourism.
Many analysts had expected that China would keep the yuan stable against the dollar to facilitate its recognition as an official reserve currency by the International Monetary Fund. In retrospect, this reasoning was flawed. All the other currencies in the so-called Special Drawing Rights basket are free-floating. And at the end of the day, getting into a largely symbolic currency club is less important than getting the fundamental monetary policy framework right.
In a perfect world, China would have moved toward a more flexible exchange rate regime years ago, when the economic environment was more favorable. But it wasn’t to be. Now Beijing will have to manage a delicate currency adjustment in the face of Fed tightening, a weak domestic economy and a volatile Chinese stock market. That leaves a great deal of room for things to go wrong.
Meaning methodology?
Here it is, from the FT.
“We don’t want to see further devaluation of the Chinese currency because we can’t rely on devaluing our currency to boost exports,” he says. “We don’t want to see a scenario in which major economies trip over each other to devalue their currencies. That would lead to a currency war. And if China feels compelled to devalue the renminbi in this process we don’t think this will be something good for the international financial system.
Also interesting that Li Keqiang ruled out a devaluation just three months ago (from memory - can't find the reference)
FT
Beijing has launched the latest attack in a growing currency war by devaluing its currency by almost 2 per cent on Tuesday morning.
The one-day move, done in a bid to boost failing exports, was the biggest since 1993 and may, analysts warn, be hard to reverse.
“This shows how desperate the government is over the state of the economy,” said Fraser Howie, a China analyst and co-author of Red Capitalism. “If they were trying, as the central bank said it was, to bring the exchange rate back into line with market expectations then they have failed miserably as the market is now just expecting further devaluation.”
The move marks a shift in historical policy during times of economic stress. In the late 1990s, China was widely credited with containing the destruction from the Asian financial crisis because it held fast to the renminbi exchange rate in the midst of competitive devaluations throughout the region.
In the global financial crisis of 2008, Beijing also refused to devalue even as its exports, a key driver of the economy, evaporated overnight.
But now, in the midst of a pronounced and persistent Chinese economic slowdown and continued appreciation pressure resulting from the renminbi’s “dirty peg” to the soaring US dollar, China’s leaders have decided to take the plunge.
OCRX - Was the removal funding uncertainty enough to account for today's strength, or might there be more?
>>In either case, there’s now enough cash to get to the reporting of data from the STOP-HE study.
Sorry, the answer was in front of me all the time!
Understood, but what is the portion? A flea bite or an arm and a leg?
EDIT-- And what's the target IRR?
I don't read anywhere what the "portion" of sales is.
this thing is not acting like a stock that's a legit buyout candidate.
You've put your finger on the problem, I think.
60% haircut. not 40%
everybody i spoke with is setting their clients up
That's what brokers do,unfortunately
Sort of like approaching the lip of Niagara falls and the motor conks out.
What's most disturbing is that the authorities seem to be flailing
FT
Hundreds of Chinese companies have halted trading in their shares as Beijing races to insulate the economy from the country’s steepest equity decline in over two decades.
The list of suspended companies has reached 760 over the past week, representing more than a quarter of all companies listed on the Shanghai and Shenzhen exchanges, according to the Securities Times, a paper published by the Shenzhen Stock Exchange.
Since hitting a seven-year high less than a month ago, Chinese stocks have suffered a precipitous decline sparked by a clampdown on margin finance — the use of borrowed money to buy shares. About $3tn has been wiped off the value of all listed companies as retail investors have rushed to unwind leveraged bets on the market.
Beijing has taken steps to keep stocks on China’s two main indices afloat, including direct purchases of large-cap companies, a halt to initial public offerings, and a cut to trading fees. But so far its efforts have failed to staunch concerns.
“There is a panic but no matter how they [the authorities] jump in, this thing just doesn’t stop falling,” said Dong Tao, an economist at Credit Suisse.
Chinese stocks fell for a fourth session of the past five on Tuesday. The Shanghai Composite shed 1.3 per cent, while the tech-heavy Shenzhen Composite lost 5.3 per cent.
The Shenzhen index is now up 36 per cent this year, having been up 122 per cent less than a month ago. The two indices have both dropped a third during the sell-off that began on June 12 in the country’s steepest decline since 1992, according to data from Bloomberg.<snip>