So What Else is New? Chinese Stocks Crash Again (Shanghai Index Plunged 6.42%)!

It looks as if I’ve been mistaken (momentarily) to expect that this week would be a big moment for the bulls.

Chinese stocks market bulls may have a difficult time to recover from today's astounding crash. The Shanghai index plunged 6.42%. The rest of the markets profusely bled as shown below.

Here’s the Bloomberg on today’s bloodbath in Chinese equities

China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows and support for the yuan eats into the nation’s foreign reserves.

The Shanghai Composite Index plunged 6.4 percent to 2,749.79 at the close. All industry groups slumped, ranging from commodity shares to new-economy sectors such as technology. Besides data showing outflows hitting an estimated $1 trillion last year, investors were concerned about a possible liquidity squeeze even as the central bank flooded the financial system with cash before the upcoming Chinese new year holiday. Some of the nation’s most accurate forecasters said the stock index may not bottom until it falls to the 2,500 level…

Tuesday’s loss was the steepest since Jan. 7, when the Shanghai gauge plunged 7 percent, the second selloff of more than 6 percent in a week that prompted the government to cancel its circuit-breakers program after four days. Stocks dropped even as the People’s Bank of China injected 440 billion yuan ($67 billion) into the financial system using reverse-repurchase agreements, the most in three years. Policy makers are trying to keep borrowing costs from rising as they contend with the slowest economic growth in a quarter century.

China’s gross domestic product growth is seen slowing further to 6.5 percent this year, from last year’s 6.9 percent. Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion, more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006.

Yuan yuan yuan, now they see the link.

Today’s crash essentially reinforces on the recent breakdown of the lows of February and August 2015 sparked by the bear market of 2016 [see above] (all charts from Bloomberg)

This comes even as I pointed last Sunday that the Chinese Vice President Li Yuanchao asserted that the government is “willing to keep intervening in the stock market to make sure a few speculators don’t benefit at the expense of regular investors”.

So whatever happened to interventions to safe keep the interests of regular investors? Have speculators been too much for the Chinese government to handle? Or could it be that China’s whack a mole policies can’t really deter or prevent the escalating imploding bubbles from surfacing? And could it be that financial markets have been too complex for the government to manipulate?

The bear market of Chinese stocks should be a wonderful example of the adversarial repercussions from the outrageous disrespect of the markets by the government through their egregious interventions or manipulations.

Of course, there are still 3 days to go for the Chinese authorities, the Fed and the ECB to prove to me that this should be a big week for the bulls.