The more China intervenes, the more its market panics — National Post View

China is now in a bear market. Fidelity Investments, which oversees the largest China funds outside of the mainland, says Chinese stocks are a buy following the selloff.

“Earnings will be adequate, we don’t expect them to blow out the lights”, said Allianz’s Hooper.

Those problems, and the fear that they could hurt the global economy, have pushed down the US stock market in recent weeks.

Since reaching a multi-year high on 12 June, Chinese A-share markets have been in freefall, with the Shanghai Composite index falling almost 32%.

Lew said it is critical for Beijing to respond to stock turmoil in ways that make the economy more market-oriented. But most Asian markets were still in the red from a week earlier.

TOKYO-The euro gathered steam Friday as Greece submitted a fresh bailout plan ahead of a key European Union meeting that could decide Athens’s future in the eurozone, while concerns over China’s stock plunge also eased.

One year ago, China’s bull run commenced.

The MSCI Emerging Markets Index climbed 1.4 percent to 932.7 at 8:27 a.m.in New York, taking its recovery from a two-year low to 3.1 percent.

Cumulative new share issuance is estimated to be RMB 510 billion on a year-to-date basis (as of July 2015). In fact, two thirds of China’s new investors in 2014 had not even completed high school. But a sinking Chinese market has made investors wary of growth prospects.

However, these actions appear to be uncoordinated, confusing and not substantial enough considering the amount of margin positions and the size of the A-shares market (which has a free float of RMB 40 trillion).

Speaking via Skype, PNC Bank Senior worldwide Economist Bill Adams said there is a “limited” correlation between stocks and growth in China.

In addition, another challenge is that government buying is now mostly focusing on blue-chip stocks, which are trading at more reasonable valuations. On the ChiNext, a Nasdaq-like board of small-cap stocks, the count was 205 trading, 279 suspended. This has clearly caused an obvious mismatch of what the government is supporting and what the investors are selling.

The Chinese government has carefully cultivated the fortunes of its nouveau riche.

A failure to break this margin deleveraging cycle could increase the risk of a systemic risk in the financial system. Gains in other markets were moderate. The PE of the overall A-share market has declined to 16x from 21x. The Shanghai Composite has tumbled 25 percent in the past month, while the Shenzhen Composite has suffered even steeper losses, down bymore than 30 percent over the same period. The country’s economy is still too dominated by habitually money-losing state-owned enterprises.

Elsewhere, an uplift in banking share prices helped boost Bank of Ireland. Unfortunately, this will only further disrupt the market clearing mechanism and exacerbate the liquidity problem.

The A-share market benchmark CSI 300 now trades at 13.5x 12-months forward P/E, and non-financials at 17.5x, derated significantly from previous highs of 18.6x/26.5x respectively, and is at 9% and 5% discount to their respective 10-year average. “We got a mandate to bring a better deal than the ultimatum that the Eurogroup gave us, but certainly not given a mandate to take Greece out of the euro zone”. In general, the Hong Kong stockmarket is more institutionalised and disciplined.

Prices in the stock market are supposed to reflect business realities: the health of the economy, the quality of the companies listed on stock exchanges, the comparative allure of alternative investments.

“With more than half of listed companies having suspended trading in their shares, it’s hard to be confident that any moves are other than transitory”, Tim Condon, an analyst at ING, wrote in a research report.

The PGMs have also bounced – platinum was last up $10 at $1,030/1,035 per ounce – it had hit fresh six-year lows earlier in the week at $1,010. “For a long term investor this is fantastic”.