Shanghai Stocks Fall Below 3000 – Trustnodes

The Shanghai Stock Index has fallen below the support line of 3000 for the first time since May, down another 1.66% this Monday.

The Shenzhen Component Index also fell 2.38% while the ChiNext Index fell 2.3% as a rout continues.

Political uncertainties ahead of the Congress this Sunday have also added to downward pressure with the China Merchants Bank seeing their stock dive 7%.

The former President of China Merchants Bank, Tian Huiyu, was expelled from the Communist Party. According to a rough translation of state media he was expelled because, among other things:

“Engaged in the connection between power and capital, relies on finance to eat finance, uses power for personal gain, harms the public and private, abuses power to accumulate wealth, Unbridled greed; corrupt life, corrupt morals.”

There is no suggestion he has committed any actual crime, but that’s not necessary to go to prison in China where the former deputy public security minister Sun Lijun and former justice minister Fu Zhenghua were recently jailed.

This political interference in markets has been ongoing for now two years in China, contributing to a worsening economy.

Market sentiment has fallen to a “freezing point,” analysts there say. A “V-shaped reversal” is unlikely, they say, expecting a U shaped recovery.

That suggests they think there’s more down to go, and it may stay there for some time before it gets better.

Nonetheless China appears to have tactically, at worst, stayed out of the OPEC+ decision to cut oil production even though it is China that will probably be worst hit out of it if it leads to further interest rate hikes.

That return of yield in the west is sucking out money from China’s economy, precipitating a slowdown that is on the verge of a recession with Q2 seeing just 0.4% growth.

Q3 data are not yet out, but a return of Xi Jinping for a third term in contravention of term limits, may well worsen market sentiment as there would be no end in sight of the political interference in the market.

It would also show that China is a bit rigid, that it can’t adapt to changing circumstances, and therefore may well be unable to deal with the worst economic crisis since Nixon went to China in 1972.

They have also shown themselves unable to accommodate some of the concerns of the United States, insinuating instead that it’s either racism or US wants to stay top dog no matter what, when the aim was and remains to remove political interference in the market at least for western companies and investors, to have a rule of law in business, at least in time of peace.

To avoid in short what we have seen in the past months, which has now led to a worsening and worsening economic situation there, as one would expect.

This rigidity traversing two US administrations has now China at a crossroad as an era of money printing in the west ends, and an era of greater integration and opening up seems to be ending in China.

This Congress therefore we have called great as analysts will be watching first whether Xi is returned, as most expect, and second which Xi.

Whether there will be room to try again and see if China can respond and understand some of the concerns, or whether that all is just racism to the nationalists.

That may well determine just what sort of recovery their economy sees as China enters one of the most challenging period in decades.