China’s CSI300 dropped nearly 3% last night and is now down 6% since the government said they wouldn’t tighten liquidity and supported “equity market stability“. Traders didn’t seem to care. The market is now down 12% from its recent peak just under two weeks ago.
Many brokerages remain bullish, reminding clients to “stay engaged”, and reiterating China’s tired long-term growth story and the current greater-fool-theory-chase-the-liquidity pitch. While some point to latest power consumption (up 6% YoY) or container volumes (only down 4% YoY) for near term confidence, China’s stock markets have gotten way ahead of themselves. At current levels, Government-stimulated liquidity is the only argument they have. And this week it wasn’t enough.
A weakened US consumer isn’t helping either.
Bloomberg: Container lines traditionally raise rates around the third quarter as shops stock up for the “back to school” and holiday shopping seasons. This year, cargo-box trade is tumbling as retailers pare orders amid weak demand. U.S. consumer spending fell at a 1.2 per cent pace in the second quarter. Inbound container volumes at the Port of Los Angeles, the busiest in the U.S., fell 17 per cent from a year earlier in June.
“Demand is very low,” said Ken Cambie, chief financial officer of Orient Overseas (International) Ltd., Hong Kong’s biggest container line. “We haven’t seen any restocking from the retailers in the U.S. and Europe.”
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