China: Stocks Going into Free Fall Mode

FN: The Chinese growth miracle has morphed into an easy credit mirage. After both credit creation and stock prices went parabolic the last two months, Chinese authorities ordered their banks to "tighten". Since most of the credit was flowing straight into stocks, the bid disappeared.

China’s Stocks Slump Most Since June 2008, Cap Monthly Loss: "China’s stocks plunged, with the Shanghai Composite Index falling the most since June 2008 and entering a bear market, on concern a slowdown in lending growth may derail a recovery in the world’s third-largest economy.

The benchmark index tumbled 6.7 percent to 2,667.75, capping its biggest monthly loss since October. The gauge has slumped 23 percent from its 15-month high on Aug. 4 and is the worst performer this month among 89 benchmark indexes tracked by Bloomberg globally.

“The local market bears are convinced that tightening is already underway,” said Howard Wang, head of the Greater China team at JF Asset Management, which oversees $50 billion. Only “a very strong set of macro numbers in August” or “stronger statements from central authorities” would change this trend, Wang said.

At least 150 stocks on the 898-member index dropped by the daily 10 percent limit. Industrial Bank Co. and Aluminum Corp. of China Ltd. tumbled by the permitted cap after Caijing magazine reported new loan growth this month may be almost half that of July. Lower profits dragged Baoshan Iron & Steel Co., the nation’s biggest steelmaker, and China Southern Airlines Co. down at least 7 percent."

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