China markets in turmoil as Russia ties add to list of risks

https://www.bloombergquint.com/markets/china-s-markets-in-crisis-as-russia-ties-add-to-list-of-risks

by mooreds • 4 years ago

154 124 4 years ago

H8crilA• 4 years ago

Friendly reminder that "X market [up/down] as investors digest Y" is the cheapest and least useful form of reporting known to mankind.

dbsmith83• 4 years ago

is the cheapest and least useful form of reporting known to mankind

Maybe not the most useful form of reporting.. but the least useful form known to mankind? After reading the article I think there's more to the analysis than just that.

systemvoltage2• 4 years ago

My dad calls it the Financial deus-ex-machina. Every single financial newspaper does it. To be fair, they gotta report what happened with the market so the headline has to capture something in addition to simply "DOW down 300 points". It is not useless, quite the contrary - you get an idea about facts + some context in less than a second of reading the headline. That's efficiency! No one is going to make correlation-is-not-causation arguments off of a morning headline. But it is funny:

“DOW down 300 points as investors worry about Russian aggression”

Next day:

“DOW up 300 points as investors re-assess the Russian aggression”

The financial world cracks me up. Dial in any earnings call to play the headwinds, tailwinds, double-down, as we continue to, can you add color to that?, etc bingo.

tkinom• 4 years ago

Fog of war.

3232• 4 years ago

I've seen it done even in the same day.

Morning: DOW down 300 points because of Fed decision

Evening: DOW up 300 points because of (same) Fed decision

Context: most financial analysts at places like Bloomberg are literally some of the lowest paid employees. Most of them never traded any financial market in their entire life, which is quite short since they tend to be in their 20s.

kkfx• 4 years ago

Beware that -300 a day, +300 the next one still means a -, a thing too many forget...

laurent92• 4 years ago

Apple’s stock app is awesome in that matter. “Why NASDAQ:_____ ticker is bound to go down in the next months” – the day after it gains 20% and doubles within the year…

AnotherGoodName• 4 years ago

These are pretty much all automated.

They take market movements and append the most relevant piece of news to that movement. If you track any stock closely you'll find your daily Motleyfool article "Why is XYZ stock is moving because of [most recent relevant news for that company]"

The article is usually one paragraph stating the stock movement and a summary of the most recent news. You can get the same summary for different movements due to the automation here.

tobyjsullivan• 4 years ago

But they don't "have to" report it. It's become standard because it's free, guaranteed content. Finance and sports both follow the same model. Every trading day (or game, for sports) is guaranteed to have an article: Up or Down; Win, Loss or Tie. The content is filler as the articles' inclusion is justified regardless.

cptnapalm• 4 years ago

My favorite thing on Yahoo finance is how the headline for the day is re-written throughout the day to keep it current, frequently becoming the opposite of what it was in the beginning of the day.

StopDarkPattern• 4 years ago

Same with "tweeter is blowing up" - "tweeter is upset" - "spytok users say".

pojzon• 4 years ago

Dave Chappelle famous words explain pretty well why we really should stop caring about twittokbooktagram.

danielovichdk• 4 years ago

This is politics in its finest.

China will not be able to handle the rise in fossil fuel prices and will perhaps be the country to ask Russia to stop it's invasion of Ukraine because it hurts China too much because of this.

USA wants this. It's not something that had just happened. This is a coordinated effort based on good intelligence work. Imo.

Xi Jinping is also running for election soon and is under massive internal pressure. So he has to act.

Not sure where this will leave Russia but they will be the one who lose because the pressure from the outside is to much. But sanctions will likely continue and Russia will be doomed.

bryanlarsen• 4 years ago

China is buying Russian oil at a significant discount. Since such a huge portion of the cost of goods is embodied energy, this gives them a huge advantage.

matthewdgreen• 4 years ago

Yes, but what will China do with the goods it manufactures? If they have the internal demand to consume them, that's good. If their plan is to sell exports to Western nations then they need to be strategic. TFA is about sanctions being extended to Chinese firms that invest in Russian energy firms, but one could imagine a spiral where the sanctions expand to other Chinese firms that produce manufactured goods ("embodied energy") as well. We're not there yet, but it is a possibility.

deutschew7• 4 years ago

For now ;) or as the old proverb goes:

Бесплатный сыр только в мышеловке

trasz• 4 years ago

For China, Russian oil price goes down, because Russia got no other buyers. And even before war Russia was selling that oil at loss. The more they sell to China, the better to the west.

FpUser• 4 years ago

Or Russia could just say this is a price and either swallow it or fuck off. Oil price is already high and due to West not buying it from Russia competition increases. So China can either pay exorbitant prices to compete with the western buyers or just take some reasonable price from Russia. Win win for either. The West of course can get mad and start sanctioning China but nobody can really predict how / when / if this is going to play.

deutschew7• 4 years ago

Putin promised Xi the war in Ukraine would be over very quickly but what has transpired is that China is part of the blowback against Russia as a result of knowing beforehand that Putin would invade Russia.

The US now has every excuse to coerce China, from everything ranging to Taiwan, trade issues.

In large, Putin's war with Ukraine ended up raising fossil, food prices which puts real pressure on Xi's regime.

I do not think Russia has the same level of worry as China because it has endless amount of oil and food that China does not. If China is suddenly no longer allowed to import these from other countries, it would be forced to trade with Russia under Putin's terms.

The last time we did this to a country, they launched a war instead of waiting for the inevitable internal collapse. All of this is creating an uncertain and volatile future.

TLDR: Putin's war and looming US sanctions against China will cause a volatile reaction.

adventured5• 4 years ago

Russia's primary problem is going to be the instability that comes out of the reveal that Putin is a typical incompetent authoritarian and Russia's military is weak (and there's nothing they can do about it, clearly, or the past decade of 'modernization' and spending would have). To the extent Russia has had some limited stability under Putin, it has been built on the image of Putin's competency as a command & control operator of the Russian state and Russia's supposed potent military strength in particular - the projection of strength generally, all the fake imagery the propaganda machine has dished out regarding Putin over two decades. Naturally, as it turns out, the truth is closer to the opposite. It always seemed a distinct aberration that Russia would manage to somehow maintain a competent, potent, relatively well-organized military while everything else was so subpar and rotting. Everything makes sense again, their military looks like the rest of the nation.

The knives will come out for Putin now that everybody knows he's weak and fragile. His recent moves to punish powerful internal figures will force him to go even further. Being likely paranoid as dictators commonly are, Putin will likely do as much damage to Russia's internal functioning as sanctions do from the outside to its economy. Putin is likely to elevate the fascism to the point where their system stops functioning much at all, including their domestic economy. Purges, gulags, genocide, things typical of later stage statist regimes, it's all on the table if Putin's intention is to retain his present power. Putin only has two choices: give it up, or kill lots of people to try to fend off the sharks that will inevitably come for him and challenge his position. The considerable, fake image of strength was previously making it largely unnecessary to go as far as most dictators do to retain control, that luxury will now vanish and it'll dramatically damage Russia. People fleeing Russia are making the right choice, get out while you can.

jcampbell1• 4 years ago

Come August when Xi will take an unusual 3rd term he was supposed to be celebrating the advantages of their form of government in dealing with covid. Instead he may be dealing with a persistent covid battle or worse an overflowing healthcare system while the rest of the world has moved on.

For giggles, the US should organize an unprecedented NBA post-covid celebration all-star thing with packed stadiums a week before the congress.

superkuh• 4 years ago

It's a bit more than an unusual 3rd term. He pretty much declared himself a dictator for life last time with the alteration of the constitution. I guess it's just my opinion, but I doubt any dictator for life is going to let go of that status regardless of any party politics. He already disapeared most of his opposition last time. The facts that he's bad for China will have no influence on his dictorial control this time. That's what being a dictator is all about.

vondur• 4 years ago

No dictator is absolute. I’m sure a lot of politics is happening behind the scenes.

jotm2• 4 years ago

So I guess everyone's preparing for when he surprisingly loses his mind and decides to invade Taiwan? Can't say we didn't see it coming then.

v-yadli2• 4 years ago

the rest of the world has moved on.

(Looking at thousands of deaths per day in the US alone)

`This is fine.jpg`

bequanna2• 4 years ago

Why are people still saying this? This statistic has been unmasked to be quite useless and only used for fear mongering so politicians/bureaucrats can cling to their emergency powers.

These “Thousands of deaths” are where the deceased happened to also test positive for COVID. Most of the deaths were people who were already very sick and likely not caused by COVID.

beebmam• 4 years ago

With the major outbreak in COVID-19 in China right now, I think there will be massive lockdowns coming. That bodes poorly for the economic outlook for that country. It is truly incredible they are still locking down for a disease that, when vaccinated for, is far less deadly or harmful than the flu.

redisman2• 4 years ago

It’s interesting how the totalitarian crackdown worked so well for the first two years but now the dirty free societies have everyone immunized by infections. As for China - I’m not sure they can crack down on omnicron as well since it’s so much more infectious and they can’t afford anymore economic shutdowns. Hong Kong already seems to have given up and following the rest of the world

CyanBird• 4 years ago

dirty free societies have everyone immunized by infections

They don't, they really don't, they just stopped caring about people dying

carom• 4 years ago

Did it work well or did China just stop reporting cases?

deutschew7• 4 years ago

Yes it is not covered by the media who is fixated on Ukraine at the moment but Shanghai is under lockdown.

paganel2• 4 years ago

but Shanghai is under lockdown.

Damn, I honestly didn't expect to read about this first on HN, you are indeed right, almost everyone seems fixated on the war (for understandable reasons, I would say).

I remember posting on this forum 2+ years ago about the Chinese authorities locking down Tianjin and potentially Guangzhou/Shenzen in the South (in early February 2020, I think), I remember a HN-er from Shenzen telling me that things were just fine there. Time does fly fast.

johndfsgdgdfg• 4 years ago

I feel bad for China. China has done everything in its power to stop COVID only the rest of the world to drop the ball. China has been blamed for origin of COVID even though WHO investigations found that COVID didn't originate in China. It's like China is in no-win situation, despite doing the right thing, because of propaganda spread by racist right wing politicians.

celticninja4• 4 years ago

What WHO investigation said it didn't originate in China?

China have not allowed a proper investigation to take place i.e by people from outside of China. China originally tried to cover up the extent of the problem so I don't trust China to investigate China.

China dropped the ball here, there is no reason they aren't in the same stage as the rest of the world, other than their own decisions. As an autocratic state they can lock down apartment blocks and just stop people moving around and people can't do anything about it. It has ended up being the reason they still need to lockdown now.

mensetmanusman• 4 years ago

Animals spread Covid. Was anyone expecting the world to wait for every animal to be vaccinated as well?

Lockdowns are a delay strategy until vaccines are available.

dirtyid3• 4 years ago

far less deadly or harmful than the flu

% of severe cases even after vax is enough to overwhelm PRC medical system, especially in less developed regions, leading to potentially millions of death considering size PRC population and gen pop lack of exposure. Covid-zero is still preferable if it can be maintained, vaccines (including mRNA) have completely failed to contain spread of omicron, which doesn't leave many options except waiting for an even less deadly variant + mass produce and distribute treatment drugs to take pressure off medical system.

I'm guessing this is omicron catching up / experimenting with dynamic-zero now that Two Sessions is over.

spywaregorilla4• 4 years ago

I don't think this article is right on the cause. China's biggest problem is, imo, the continued slow motion train wreck of evergrande and its real estate market collapsing. So much of China's growth was money sloshing around due to things getting built. But that seems to be harshly falling. There's hundreds of billions of debt hovering around default and the best these companies can do seems to be to double down on building and selling more buildings, which I sort of expect people don't particularly want to buy. General supply chain issues and covid affect this too. Food availability due to lower exports of wheat from russia and ukraine could cause an issue too.

dgellow• 4 years ago

could someone explain in a few sentences why it takes so long for Evergrande to collapse?

deutschew7• 4 years ago

A large source of CCP elite's wealth comes from Evergrande, Sunac, Country Garden.

A large chunk of Chinese savings is tied to it. If they allowed people to sell or liquidate their shares, it would cause real instability.

voisin• 4 years ago

Too big to fail combined with an autocratic government ostensibly built upon stability. Who dares push it into bankruptcy and risk the certain wrath of that government?

dirtyid3• 4 years ago

Evergrande (real estate in general) is undergoing intentional, controlled unwinding initiated by CCP kicked off by "three red lines". It was never going to collapse, the entire point of Evergrande was to avoid an Lehman moment by preempting it.

jbay808• 4 years ago

They're carefully trying to change ownership of the hot potatoes so that as many of them are in foreign hands as possible.

If Evergrande defaults, foreign bondholders will claim their collateral.

So instead, for example, they have state-owned companies buying up Evergrande's assets, then Evergrande using that money to pay back local creditors, so that Evergrande is eventually left owning neither money nor assets to pay back foreign bondholders. Nothing left to seize in court.

Meanwhile, they are trying not to create a shock in real-estate prices that would undermine the other overleveraged developers, such as would occur if Evergrande unloaded all of their assets at once. Each developer is balancing their debt-to-asset ratio, so if their real estate assets drop in paper value, they end up in Evergrande's position.

Foreign bondholders appear to be playing along with this, which is fascinating; it suggests that either those bondholders are, too, looking to offload their hot potatoes and want to preserve the appearance that they're still worth something as they search for buyers, or else they're using those bonds as collateral for their own loans. As long as credit rating agencies play along and don't drop the credit rating to full default, they may be able to do so.

ianbicking• 4 years ago

Can China just not let Evergrande fail? I'm assuming the debt is largely held in China, the buildings are in China, and debt holders who expected to be able to get their money back are going to be disappointed but in an authoritarian government can you just force people to take the loss without letting that loss transmit to the larger economy?

spywaregorilla4• 4 years ago

It's not just evergrande, it's all property developers pretty much. It's a real estate bubble popping when an immense portion of wealth and growth is in real estate.

IMSAI80802• 4 years ago

A lot of it is tied in with local government. The central Chinese government inadequately funds local governments. The local governments close the funding gap by selling/leasing land to developers (often kicking citizens off their land without proper compensation). Chinese citizens buy the properties due to a number of cultural and financial factors. There is not much else to invest in. Savings interest rates are very low. Chinese citizens often distrust the local stock market due to corruption issues and shared memory of previous crashes. Ordinary Chinese citizens are not permitted to invest overseas. Local property is the only reasonable investment to many. Many of these properties are never even lived in. However Chinese citizens are going to stop buying eventually as property prices are already well into greater fool territory. When that happens, local government will be in trouble.

samstave• 4 years ago

YEAH! Those chinese amateurs should do what we do in the USA ; just print more money and bail them out, and let their competitors acquire the company for pennies on the dollar after our government employees have had the opportunity to let all the people in their family know that trillions in bailouts is n the way -- oh yeah, and dont forget to setup an LLC in your spouses name to slurp off such bailout funds as well.

(This seriously happened BTW, if you dont recall)

ratsmack• 4 years ago

Yes, their entire real estate market has been in slow motion collapse for the better part of a year. Too many articles on the state of the economy are using the Russia crisis to drive their news cycle, when actually most of the turmoil was already happening.

adventured5• 4 years ago

China's biggest problem is, imo, the continued slow motion train wreck of evergrande and its real estate market collapsing.

It's at least an order of magnitude larger of a problem for China than ties to Russia are.

For anyone unaware, nearly 2/3 of China's household wealth is tied up in real-estate assets (for the US it's < 30% of household assets in real-estate). That's a doubling over what it was a decade ago. China's socio-political stability is particularly bound to the condition of their real-estate market. A crash there would be devastating; if housing were to fall enough to revert back to that asset class being 1/3 of China's household asset base, maybe $30 trillion in national 'wealth' would have to vanish.

NicoJuicy3• 4 years ago

Well, that's to be concluded.

An additional stress on the system could make the problem exponentially worse.

alephnan5• 4 years ago

Food availability due to lower exports of wheat from russia and ukraine could cause an issue too.

Why is this an issue for China anymore than the West?

In fact, China has the majority of the world's grain stash. https://asia.nikkei.com/Spotlight/Datawatch/China-hoards-ove...

detaro4• 4 years ago

Where did the comment say that its more of a problem for China than the west?

mahkeiro• 4 years ago

Because China is not food independent. Most of western countries are.

spywaregorilla4• 4 years ago

Chinese food security is generally lower than that of the west

https://impact.economist.com/sustainability/project/food-sec...

The US ranks 9th whereas china ranks 34th. They're not going to famine or anything but food prices, or really just inflation more broadly, could be an issue. The reason china stockpiles grain is because it doesn't produce enough for itself.

jasonjei• 4 years ago

Don’t forget the big problem China will eventually have to deal with: their single child policy is coming to a head with their aging workforce.

When the chickens come home to roost, they’re going to have to figure out who is going to replace the retired population, and nobody’s in a rush to immigrate to China.

ecshafer• 4 years ago

There are quite a lot of people who try to immigrate to China. If China opened up, they wouldn't have a shortage of immigrants. There are immigrant communities from all over already there.

China is dealing with their one child policy, they have put the cap at 3 children iirc currently, and are also making policies against things like abortion and divorce. Which may not be the correct move, but I do see more laws incentivizing children coming.

riffraff2• 4 years ago

There are quite a lot of people who try to immigrate to China.

Do you have a source i can read about that? I'd be interested to know more about this.

finiteseries2• 4 years ago

There are 1.4 billion people in China, and ~1 million immigrants pre pandemic. The number of new migrants required would be astronomical in a country already struggling with food and energy insecurity.

It takes 20 years to make a 20 year old consumer while the rest of the population ages 20 years.

Seems a bit optimistic and wishy washy to say the least.

dirtyid3• 4 years ago

replace the retired population

Why replace anyone? The alternative is to ramp down to a lower population baseline and deal with the transition. 800M Chinese by 2100 is still plenty. Reality is right now there's 100s of million undereducated/undertrained Chinese who can't be integrated into modern economy - they're net drains. And even current system is struggling to employ millions of STEM graduates. PRC doesn't need immigration, just clamp down on top level brain drain and setup foreign worker program to take care of the aging - plenty of cheap ASEAN labour. Bonus side effect of less people = more self sufficiency and freedom to conduct assertive foreign policy. There's few upsides to maintaining and trying to increase living standards of 1.4B people with PRC resources.

adventured5• 4 years ago

That's the correct answer. I never cease to be astounded that so many people don't seem to grasp that you can increase output per capita, productivity per capita, as the population contracts.

The focus should be on improving the quality of life of the people, not on expanding the economy in absolute terms.

China would be better off with 1/2 the people at the same GDP (ie ~700m people at ~$24,000 per capita GDP).

Population contraction is desirable in many cases, so long as you can continue to increase productivity per capita. China has a long ways to go yet in terms of potential to raise their per capita economic output, if they're willing to pair that with a contracting population. And the lightening (from depopulation) on their resource needs is a huge help, it makes their situation so much easier.

blackoil• 4 years ago

Considering that Europe/Japan haven't completely collapsed it is a solvable problem. Increasing automation, moving people away from agriculture an d moving low value labour intensive work to South East Asia and Africa are obvious steps.

throwaway4738252• 4 years ago

Western Europe has a lot of immigration and the population is actually increasing. Japan has stagnated for about three decades now.

gameswithgo• 4 years ago

Those of you who seem to think a nation has to grow populations indefinitely or fail, what is the long term end game in your mind? Hope that your nation wins the inevitable global resource war?

NicoJuicy3• 4 years ago

Indeed. There's a large telegram group of engineers fleeing out of Russia.

Almost all want to flee/relocate Europe/US/Canada.

Turkey, Georgia, ... Come in after.

I literally saw 0 requests for China.

SXX• 4 years ago

It's simple. 90% of people feeing know English to at least some extent, but almost no one know Chinese.

Also regardless of what Russian regime propoganda trying to sell we all grown on western culture and want to live in western world. People who wanted to live in Asia moved to Thailand / Vietnam / Bali long ago.

tclover2• 4 years ago

All markets are not stable right now, but EU and US are a mess indeed https://i.imgur.com/l8Hgsnm.png

jotm2• 4 years ago

As someone who doesn't care about the markets, I see sudden/sharp price increases for food, fuel, gas, wood, metals, paint, and a few other things. A real mess.

schleck8• 4 years ago

Looks like some European ones are already recovering quickly though

tclover2• 4 years ago

Yeah, up and down constantly. I'm following markets and the worst I've seen was almost -20% YTD for DAX recently, this is scary

CodeWriter23• 4 years ago

American Saber Rattling, greatly overestimating China’s dependence on the West. $128B/yr investment can easily be secured from Russia. And what? The West is going to stop buying Chinese finished good and make their own? LOL

celticninja4• 4 years ago

$128bn a year investment from Russia? That's a lot of roubles and the number of roubles required will only go up. Russia are going to need every penny they have to rebuild the army that is currently being pummeled.

NicoJuicy3• 4 years ago

Euh, Russia was similar to the US 30 years ago.

US grew x14 and Russia literally stayed the same.

You're claiming a country with the GDP of Italy can replace the entire west. While they are already spending 6% on military and everyone can see how that turned out...

Big LOL

trhway• 4 years ago

China expressed interest in buying on the cheap the stock of those large Russian corporations most of which are doing resource extraction.

China markets in turmoil as Russia ties add to list of risks

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