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CHINESE STOCKS PLUNGED today after the country’s securities regulator rapped three major brokerages for continuing to lend money for stock purchases in violation of rules.
As punishment for extending so called “margin trading” contracts, the brokerages are forbidden to offer credit to new customers for three months.
At one point, the Shanghai Composite Index was down 8.3%, although those lossed were later trimmed to 7.7%, the biggest single-day fall since the financial crisis of 2008.
Share prices of brokerages were hardest hit, with some falling by the daily loss limit of 10%.
Despite the sharp fall, the Shanghai Composite Index is still up 55% in the past 12 months and up 33% for the past three months.
Why did the market fall so much?
Investors and analysts see the penalties against the brokerages as foreshadowing more curbs on credit-financed trading by China’s government.
Authorities want to stop the stock market’s boom over the past year from turning into a bubble that could damage the broader economy.
The Shanghai Composite surged 54% last year, partly because of easy credit that investors used to finance their trading.
Market selloffs can also become self-reinforcing as other investors sell because of fear they will suffer even greater losses if they do nothing.
Did other markets around the world fall too?
No. Even though Monday’s fall was particularly steep, investors in other markets are brushing it off as a situation peculiar to China.
The government allows only limited foreign investment in Chinese stocks and the country’s financial system is largely walled off to the rest of the world.
The exception was Hong Kong, where many Chinese companies have stock market listings. A bigger catalyst for global markets will come Tuesday when China, the world’s No. 2 economy, reports fourth quarter growth figures.
What are market experts saying?
“Margin financing is simply overextended,” said Dickie Wong, executive director of research at Kingston Securities in Hong Kong.
Regulators want to “simply give pause” to the brokerages, he said.
“In the past, mainland investors had no clue on margin financing and short selling, but after China introduced these two ways to trade stocks, people became so happy because they can borrow money and just go all in.”
Is the plunge a sign of bigger problems?
It shows problems on several levels. Stock markets should allow investors to discover the fundamental value of companies, and although all markets are prone to under- and overshooting due to herd psychology, China’s market is particularly off-course.
That’s partly because it is dominated by opaque state-owned companies. In their relatively short history, China’s stock markets have fluctuated in ways that bear no relation to economic reality.
Its latest problem is that debt has fueled the recent rise in stock prices. There are also signs of debt-related stress in other parts of China’s economy including property, which is undergoing a painful government-instigated slowdown.
One developer, Kaisa Group, recently missed a $23 million interest payment on a bond abroad, alarming investors.
Additional reporting Peter Bodkin
Originally posted at 11.13am
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Thats nothing. Put a teenager in front of one and you don’t have to talk to them for years!
Parents should be very careful with allowing children access to tablets.
@Jack Cassady: airs actually really important to remember that tablets are vital communication devices for children with proven speech delay or who are non verbal. Please don’t confuse the two. Speech and communication are two different things. There are a huge amount of speech and communication apps that are vital for kids with speech and language issues. These are usually kids with pre existing conditions like Down Syndrome or Autism and are used in conjunction with a speech therapist !!!
@Catherine Sims: jack was being sardonic, the tablets he was referring to were not of the electronic variety. Btw I completely agree with your comment, my son is one of those who develop those apps.
@Catherine Sims: Not with a speech delay. A speech delay is when kids develop sounds at a slower rate than their peers. This may rectify itself, or may require a bit of speech therapy which will focus on oromotor skills e.g. tongue positioning. They are very successfully used as an augmentative or alternative communication device for those with severe language disorders. They are used as a communication device and can be life changing for those who may never develop oral communication to a functional degree. They have never been shown to be beneficial in typical speech or language development. As the study indicates they can actually delay development as some of the most important factors in child language development are interaction and eye gaze
@Anne Marie Devlin: you are talking about typically developing children and I am not. Unmade that clear when I referred to both Down Syndrome and Autism. My degree is in psychology and puts grad early intervention and actually I’m on the autism spectrum myself.
@molly coddled: Thanks Molly I’m not good at recognising sarcasm as I’m on the Autism spectrum. Has your son done any apps with pictures not icons maybe in two steps and no more ? Or a good virtual visual schedule ?? Let me know if you can. I’m always on the look out for communication apps more suited to children with maybe moderate to severe learning disabilities. Most are best suited to mild and moderate .
None too sure about the high percentage, I’ve a 4 yr old with speech delay/disorder & has never held or played with a device. Speech & Language delays & disorders were around long before wifi
@Twittwootou: exactly, my 10 year old had a severe speech and language disorder as did my 38 year old brother.
I’m sure it’s in our genes
@Lily: by the same logic, lung cancer existed before smoking, so……………….?
@Twittwootou: so based on knowing one or two people you think its a none issue?
You understand how research study’s work right? They use much larger groups and they use control groups too.
@Lily: It depends on the type of disorder. It is thought that genes can play a role in some speech or language disorders. Others may be the result of pre-natal trauma or environmental issues. However, the aetiology of most is simply unknown. What we do know definitively is that the typical development of language depends on a blend of cognitive, physiological, motor and social factors and that children whose development in any of these areas is hampered are much more likely to have a delay or disorder. From a social perspective, joint attention and eye contact are crucial. Cognitively what you need to encourage is symbolic play – pretend play such as using a banana as a phone. Spending large amounts of time in front of a screen can mean that infants are not developing in these areas.
@Twittwootou: this only relates to children who have access to a smartphone every day. ..
@Lily: exactly I had a speech delay, a couple of cousin’s had it too along with my 3 kids
@Twittwootou: That’s like saying smoking doesn’t increase ur chances of cancer because some people don’t smoke and they still got cancer. It just increases the likelihood. It doesn’t mean its the only cause.
What a load of rubbish. My daughter has been using a tablet since 18 months and can have a full conversation with you at 2 and a half. She watches a lot of education videos (Steve and Maggie) and her vocabulary is amazing thanks to it. Even if the odd word does sound like your listening to peppa pig, it’s a small price to pay.
@Trevor Beale: imagine what she could have been like if she had spent all that time interacting with you, instead of an electronic gadget.
@Trevor Beale: don’t think it’s something to be proud of really ..
I see you’re all rushing to judge Trevor with no context at all. Child could be on it for 15-30 mins per day which is proven to be beneficial. You’re all presuming the child is on it all day. Maybe have a look up yourselves from the journal and commenting on everything (see I can make presumptions too)
@Anto Curran:
Very true Anto or Trevor could be an experienced conmenter who knows how press peoples buttons.
Some parents might not have their kids playing educational apps. I’d say the ‘button basher’ type games would be a shade worse than sitting them in front of cartoons on the tv. On the other hand, an educational interactive app/game is probably a shade better than an educational tv program.
@Suzie Sunshine: Couldn’t be any prouder of my daughter Suzie.
@sean o’dhubhghaill: She spends plenty of time with her dad Sean. All productive.
@P.J. Nolan: Think you’d want to learn how to spell commenter before you start judging anyone P.J.
@Anto Curran: Anto and WJ, least there’s still some people with sense on this forum.
@Trevor Beale: WA
@Trevor Beale
: Now don’t tell me you hit the wrong button did you ?
Never happens to me.
@P.J. Nolan: lame excuse brains
@Trevor Beale: I have no doubt that you are proud of your daughter ..
I assume someone taped an iPhone to Michael Healy-Rae’s face for his entire childhood.
Keep the tablets out of reach, preferably in the locked medical cabinet!!
@Micheal S. O’ Ceilleachair: Then where do I put my children??????
@その男、凶暴につき: Under the stairs like the rest of us
Why not load the smartphone/tablet up with games that teach problem solving skills etc. My eldest was able to pick up coding via Scratch jr and my youngest knew all of her colours/shapes/fruits/vegetables and so on back to front long before she started Montessori.
Using them as a portable telly? No. Using them as a learning tool? Yes.
what to do if your child of 2years old keeps crying and your trying to eat your dinner in peace, or your trying to sleep and they keep crying for a smart phone. my daughter is smart phone mad she can’t live without youtube kids and its true she has a speech problem.
@Nasir Saeed: well that’s your own fault for getting her addicted to it in the first place
What a load of complete and utter garbage. Ive a daugher age 4 who speaks 3 languages fluently (2 by age 2) She watched about 20 minutes a day from age 2. Remember its just a small tv screen with the programs you select (as opposed to tv channels) this is just a technophobe article with nothing to back it up.
Go home iMoan, you’re drunk.
If you must have the tv on, put it on subtitles if a young child is in the room. A babble they don’t understand will make them turn off language development.
Well! No shit, Sherlock!!!
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