China Calm Shattered: Probe Sparks Selloff in Stocks

  • Citic Securities leads losses after revealing investigation
  • Industrial profits drop 4.6% in October as slowdown deepens


  • China’s stocks tumbled the most since the depths of a $5 trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds.

    The Shanghai Composite Index sank 5.5 percent, with a gauge of volatility surging from the lowest level since March. Citic Securities Co. and Guosen Securities Co. plunged by the daily limit in Shanghai after saying they were under investigation for alleged rule violations. Haitong Securities Co., whose shares were suspended from trading, is also being probed. Industrial profits slid 4.6 percent last month, data showed Friday, compared with a 0.1 percent drop in September.

The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth. A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year.

Brokerages Plunge

“The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.”

Friday’s losses pared the Shanghai Composite’s gain since its Aug. 26 low to 17 percent. The Hang Seng China Enterprises Index slid 2.5 percent in Hong Kong. The Hang Seng Index retreated 1.9 percent.

A gauge of financial shares on the CSI 300 slumped 5 percent. Citic Securities and Guosen Securities both dropped 10 percent. Haitong International Securities Group Ltd. slid 7.5 percent for the biggest decline since Aug. 24 in Hong Kong.

The finance crackdown has intensified in recent weeks and ensnared a prominent hedge-fund manager and a CSRC vice chairman. Citic Securities President Cheng Boming is among seven of the company’s executives named by Xinhua News Agency as being under investigation. Brokerage Guotai Junan International Holdings Ltd. said Monday it had lost contact with its chairman, spurring a 12 percent slump in the firm’s shares.

An industrial explosives maker will become the first IPO to be priced since the regulator lifted a five-month freeze on new share sales imposed during the height of the rout. Ten companies will market new shares next week. The final 28 IPOs under the existing online lottery system will probably tie up 3.4 trillion yuan ($532 billion), according to the median of six analyst estimates compiled by Bloomberg.



JB offshore.mp4  The First Rule Is Safety

Barron’s on Alibaba : The Stock Will Tank 50%


Chinese online retailing behemoth Alibaba took the stock market by storm when it went public almost exactly a year ago.

The September 19, 2014 IPO priced at $68 per share, giving the company an eye-popping valuation of $168 billion.

“Today what we got is not money,” CEO Jack Ma said that day. “What we got is the trust from the people.”

But in a new, devastating 3000-word cover story for Barron’s, Jonathan Laing struggles to find any redeeming qualities in the company and its stock.

For starters, Laing believes the stock, which closed at $64.68 on Friday, is worth half that.

… Forty-five of the 52 brokerage analysts covering the company still have Buy recommendations on the stock, according to Bloomberg … The average price target of this crowd: $95.50, up nearly 50% from the current level. It’s time to get real. A decline of up to 50% looks far more likely. Alibaba shares trade at about 25 times the consensus earnings estimate for the year ahead, and that should be closer to eBay ’s (EBAY) multiple of 15 …

In addition to the rich valuation, Laing warns about competition and discusses the history of Chinese IPOs that went from hot to cold.

However, the bulk of Laing’s screed raises red flags about corporate governance, conflicts of interest, counterfeit goods, and various other questionable business practices.

Particularly disturbing was the suggestion that Ma and his team might actually be making up some numbers, including its very flashy revenue growth stats, which Laing notes are considerably larger than other large tech growth companies like Google,, and Facebook.

… Anne Stevenson-Yang, founder of Chinese research firm JCapital Research, has closely tracked the mainland e-commerce industry in general and Alibaba specifically. She finds the growth numbers puzzling. She observes that “Alibaba’s financial reports have broken free of verifiable reality and have reached an escape velocity that doesn’t comport with Chinese government figures of overall retail sales, consumer spending, or online commerce.” Consider this: Alibaba claims to have 367 million users — about the same as one government agency’s estimate of China’s entire online-shopping population. Or this: Alibaba claims its average shopper spends 26% more on its sites each year than the average U.S. online shopper spends on all sites. Does that make any sense, given American consumers’ far greater affluence and ability to avail themselves of a vastly more developed e-commerce ecosystem?

… That $1,215 average spend at Alibaba also seems high in view of the total average annual per capita expenditure in China, online and at physical stores; that stands at about $2,260.It strains credulity that the average Alibaba user would spend over half of his consumer outlays on Taobao and Tmall, given that the sites have a negligible presence in categories that account for the bulk of consumer spending, like food and beverages, housing, transportation, home health products, and restaurant dining 

Laing notes that Alibaba denies any of its reported figures have been inflated.

Ma’s rags-to-riches story and disarming charm has probably helped Alibaba sell an image of integrity. But Laing’s take-down of the company is comprehensive and detailed enough that you can’t help but be left with a little doubt in your mind that something fishy is going on at the company.

“In the end, gaudy financial reports can only work for so long before reality intrudes,” Laing writes. “This hard lesson figures to be driven home to Ma and his trusting investors in the coming years, and it won’t be pretty. ”

Read Laing’s whole story at

Protect your Profits

Shipping Sector Sinking : Capesize Rates Collapse with Coal / China Imports

“It looks like the market is going to continue being a big disappointment”

A deeper slump in earnings for ships that carry most of the world’s coal and ore cargoes would force owners to take vessels out of service, according to shipbroker RS Platou Markets AS.

Average daily earnings for Capesize ships fell to $3,735 today, the lowest in more than two years, according to data from the Baltic Exchange in London. Rates will probably remain low next year, according to Herman Hildan, shipping analyst at Platou.

“At the moment, they’re barely covering their operating costs,” Hildan said by phone today from Oslo. “It doesn’t make sense for owners to participate in fixing vessels” if rates fall further.

Signs of slowing growth in China, the world’s largest importer of thermal coal and iron ore, have caused a collapse in Capesize rates of about 90 percent this year. China’s economy will expand by 7 percent next year, the slowest growth in a quarter century, according to economist forecasts in a Bloomberg survey. Customs data showed a slump in ore imports in November.

Hildan’s own estimates show Capesize vessels are currently earning $6,900 a day on average. Shippers would begin taking their vessels out of service when the daily rate falls below $5,000, he said.

The rate for the vessels, which can carry as much as 160,000 metric tons of iron ore, has averaged $13,923 in 2014, according to Baltic Exchange data. Analysts were expecting daily earnings of $18,500, according the median of estimates gathered by Bloomberg in January.

“It looks like the market is going to continue being a big disappointment” in 2015, Hildan said.

It is human nature to look for bargains – and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.

What To Do ?

Here is our recent letter(the section on shipping)

Managed Accounts Year End Review and Forecast

Shipping Sector / Bulk ShippersYou can review our stock market letter at to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email OR  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://


Lor Loewen's photo.

China Data Signals Slowing Economy – Commodities Update – Oil, Iron Ore, Gold, Nickel, Copper

Copper lead most industrial metals lower after factory and retail-sales data signaled further slowing in China, the world’s biggest user.

Copper in London fell as much as 1 percent, while aluminum, nickel, lead and tin also declined. Industrial-output growth in China was the weakest in August since the global financial crisis, while investment and retail sales moderated, figures released Sept. 13 showed. Factory data due today from the U.S., the second-biggest metals user, will probably indicate activity in August slowed from the previous month, according to a Bloomberg News survey.

“The Chinese data over the weekend came in worse than expected,” Daniel Hynes, an analyst at Australia and New Zealand Banking Group Ltd., said by phone from Sydney. “It’s not surprising the base metals are weaker on the back of it.”

Copper for delivery in three months on the LME fell to as low as $6,770.75 a metric ton, the lowest intraday level since Sept. 11. Prices were down 0.5 percent at $6,804 a ton by 3:16 p.m. Hong Kong time, poised for the lowest close since June 19.

In New York, the December-delivery contract dropped 1 percent to $3.077 a pound, while in Shanghai the metal for delivery in November fell 0.4 percent to close at 48,380 yuan ($7,877) a ton.

Industrial output in China rose 6.9 percent from a year earlier in August, the National Bureau of Statistics said on Sept. 13. That’s down from 9 percent in July and the slowest pace outside the Lunar New Year holiday period of January and February since December 2008, based on previously reported figures compiled by Bloomberg.

On the LME, lead fell 0.6 percent to $2,110 a ton, while aluminum declined 0.4 percent to $2,020.50 a ton.

Vale’s View

Iron ore may rise to as much as $100 a ton by the end of the year because of declining inventory at ports, Vale Chief Executive Officer Murilo Ferreira told reporters on Sept. 12 in Beijing. Some producers are reducing exports given current prices, Ferreira said. China is the world’s largest buyer.

In China, there’s mounting evidence locally-mined supplies are starting to drop, Morgan Stanley’s Crane wrote. Output, when adjusted to show the equivalent of 62 percent content, fell 13 percent between April and July year-on-year, he said.

“Market participants appear split on the floor price,” Australia & New Banking Group Ltd. analysts including Mark Pervan wrote in a report today. While some are “thinking the resilience of Chinese iron ore supply will see prices fall below $80 a ton, while others firmly believe domestic output can’t sustain current price levels for much longer.”

Expanding Glut

Iron ore prices are unlikely to recover as the global surplus expands, Goldman Sachs Group Inc. said in a Sept. 10 report. The bank reduced its price forecast for the final three months of 2014 by 10 percent to $90, and also reduced full-year estimates for 2016 and 2017.

The structural nature of the surplus and a weak demand outlook in China make a recovery in prices unlikely, Goldman analysts Christian Lelong and Amber Cai wrote in the report. The global glut will more than triple to 163 million tons in 2015 from 52 million tons this year, and widen further to 245 million tons in 2016 and 295 million tons in 2017, it said

Oil Supply

Brent fell to $96.27 a barrel after settling at its lowest level since June 2012 amid concern global fuel consumption is slowing while output climbs. West Texas Intermediate crude sank 1 percent to $91.34 today, after slipping 0.6 percent Sept. 12. The International Energy Agency cut its global oil-demand forecast for 2015 last week.

Russia’s ruble slid as much as 0.5 percent to 37.0380 per dollar, a record low, before trading at 37.985. The euro bought 49.2745 rubles, the most since Sept. 1. The Micex Index climbed 0.2 percent in Moscow.

Copper for three-month delivery on the London Metal Exchange fell to $6,802.75 a metric ton, following last week’s 2 percent retreat. Lead dropped 0.6 percent to $2,108 a ton.

Gold for immediate delivery increased 0.4 percent to $1,234.98 an ounce after closing last week at $1,229.65, the lowest since Jan. 9.

Palladium climbed 1.3 percent to $848.50 an ounce.

2014-08-13 Reuters Gold Poll

Reuters quarterly interviews analysts to gather their gold price prediction. We have collected the forecasts made in 2014 and conclude that the sentiment has stabilized but the expectations for 2015 remain low.

THOMSON REUTERS 2014 Avg Gold Price Prediction 2015 Avg Gold Price Prediction No of Analysts interviewed
Q1 Poll Jan 2014 $1,235 37
Q2 Poll Apr 2014 $1,278 $1,250 28
Q3 Poll July 2014 $1,277 $,1250 31

 Nickel Falls a Fifth Session Amid China Slowdown Signals

Sept. 15 (Bloomberg) — Nickel and aluminum fell for a fifth session in London as industrial metals declined after factory and retail-sales data added to evidence of a slowing economy in China, the world’s biggest consumer. Copper slid.

Chinese industrial-output growth in August was the weakest since the global financial crisis, while investment and retail sales moderated, figures showed. Factory data due today from the U.S., the second-biggest metals user, will probably indicate activity in August slowed from the previous month, according to a Bloomberg News survey.

“Weak Chinese data weighed on base-complex prices,” RBC Capital Markets Ltd. said in a note today. Commodities slumped to the lowest level in more than five years.

Copper for delivery in December lost 0.8 percent to $3.081 a pound by 8 a.m. on the Comex in New York.

The metal for delivery in three months fell 0.4 percent to $6,808 a metric ton on the London Metal Exchange and lead touched the lowest price since June. An index of the six main metals traded on the LME slid the most since March last week.

Industrial output in China rose 6.9 percent from a year earlier in August, the National Bureau of Statistics said on Sept. 13. That’s down from 9 percent in July and the slowest pace outside the January-February Lunar New Year holiday period since December 2008, based on previously reported figures compiled by Bloomberg.

“Prices may well weaken further,” William Adams, an analyst at in London, said in a note today. “We saw last week a combination of weakness and bouts of scale-down buying, and we feel we may see more of the same this week, especially in those metals that have seen strong price gains in recent months.”

Copper stockpiles monitored by the LME fell 0.1 percent to 156,375 tons, daily data showed. Orders to take the metal from warehouses rose to 40,250 tons on bookings in New Orleans and are up 40 percent in three sessions, the most since April 2013.

Tin and zinc declined in London.

China’s Cooling Economy Hits Shipping Sector / Copper

The growth  numbers are astounding – for the United states – but for china are said to be a ” cooling’. The result will be a decrease in imports of the goods that need ships to carry iron ore , coal and copper.

The BDI = Baltic Trade index fell  March 2014
Baltic Dry Index (BDI)    -127   1453 Rates


(Cape index)


(Panamax index)


(Supramax index)




















9105 9440


Spot 4 TC Average = The Average Value of the Four Main Shipping Routes applicable for each of the 3 types of Ships BDI=The Weighted Composite Index of BCI/BPI/BHMI

Wednesday – and that took down recent gains that had stretched back more than a week.

Here is Bloomberg’s story

China Data Show Economy Cooling

By Bloomberg News Mar 13, 2014 12:36 AM PT

Photographer: Tomohiro Ohsumi/Bloomberg

Customers browse clothing inside a store in Wuhan, China.

Customers browse clothing inside a store in Wuhan, China. Close


Photographer: Tomohiro Ohsumi/BloombergCustomers browse clothing inside a store in Wuhan, China.


China’s industrial-output, investment and retail-sales growth cooled more than estimated in January and February, signaling an economic slowdown that makes the government’s 2014 expansion target harder to reach.

Factory production rose 8.6 percent in the two-month period from a year earlier, the National Bureau of Statistics said today in Beijing, the weakest start to a year since 2009. Retail sales advanced 11.8 percent, the slowest pace for the period since 2004, while the 17.9 percent increase in fixed-asset investment was a 13-year low for the months.

Hong Kong stocks fell and copper extended declines following the data, which came two hours after Premier Li Keqiang indicated he was confident the nation would meet what he said was a flexible growth target of “about” 7.5 percent. The slowdown may test the Communist Party’s commitment to give market forces a bigger role in the world’s second-largest economy while confronting overcapacity, debt and pollution.

“This is a very fast deceleration,” said Yao Wei, China economist at Societe Generale SA in Hong Kong, ranked as the most accurate forecaster of China’s gross domestic product by Bloomberg. “This is really beyond the tolerance of the Chinese government. As a result, I think they will cut the required reserve ratio quite soon or do some easing.”

Such a reduction could happen “within a few days” if the government wants to achieve 7.5 percent expansion, Yao said.

Stock Markets

Hong Kong’s Hang Seng Index (SHCOMP) fell 0.7 percent at 3:16 p.m. local time after rising as much as 0.6 percent earlier in the day. The Shanghai Composite Index, which pared gains after the reports, closed 1.1 percent higher.

China combines data for industrial output, retail sales and fixed-asset investment for January and February, citing distortions from the weeklong Lunar New Year holiday, whose timing differs each year.

Factory-production growth compared with the 9.5 percent median projection of analysts surveyed by Bloomberg News and a 9.7 percent advance in December. Retail sales were projected to rise 13.5 percent. They increased 13.6 percent in December.

The median estimate for fixed-asset investment growth was 19.4 percent, after a 2013 full-year pace of 19.6 percent and 21.2 percent in the first two months of last year.

‘Dramatic Slowdown’

“The fairly dramatic slowdown is unusual in Chinese economic history of the last decade” and today’s figures are “shockingly weak,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said in a note. “It points to a major deceleration of momentum in the beginning of 2014.”

Previously released data for February showed exports unexpectedly plunged by the most since the global financial crisis, producer-price deflation deepened and credit growth trailed estimates.

Data today from the statistics bureau also showed that the value of homes sold fell 5 percent from the same two months a year earlier. That compared with an almost doubling in sales in the first two months of 2013.

China Lodging Group Ltd. (HTHT), a Shanghai-based hotel-chain operator, said its occupancy rate dropped to 90 percent in the fourth quarter from 92.1 percent a year earlier, mainly due to a “soft and still recovering” economy, according to a March 11 statement.

Flexible Target

“Since we say the GDP growth target is about 7.5 percent, ‘about’ means it has a certain degree of flexibility,” Li said at a press briefing in Beijing today after the end of the annual meeting of the National People’s Congress, referring to gross domestic product. “A bit higher or a bit lower, we have a level of tolerance here.”

The government cares more about jobs and ensuring people’s livelihoods rather than the pace of growth, Li said.

Credit Agricole’s Kowalczyk said Li’s highlighting of the “soft nature” of the target “will give him some flexibility to absorb the current slowdown without automatically reaching for stimulus measures as he would have in the past.”

China was able to realize last year’s economic targets without using short-term stimulus measures, Li said today. “Why will we be unable to do so this year?” he asked.

Li said earlier this month that pollution is a major concern, pledging to “declare war” on smog and close coal-fired furnaces. The country will reduce emissions and impose a ceiling on energy consumption, Li said in his work report to the NPC.

Weaker Yuan

The yuan has weakened about 1.4 percent against the dollar this year, while the benchmark money-market rate this week touched the lowest level since March 2013. Yuan trading in Hong Kong’s offshore market trimmed gains to 0.07 percent following today’s data, after rising as much as 0.23 percent earlier.

China’s seven-day repurchase rate rose today, halting a five-day decline, after the central bank stepped up draining of excess cash from the financial system. The rate climbed 28.5 basis points to 2.51 percent as of 2:49 p.m. local time.

“Premier Li will have to allow further policy easing,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong, estimating the data suggest growth about 7 percent. “It is perhaps the time” for the central bank to contemplate cutting interest rates or banks’ reserve requirements, since it’s unclear if China can sustain easier conditions in money markets and a weakening of the exchange rate, Liu said



AMP Portfolio Overview : Higher Stock Prices Are Set In Place

The Apprentice Millionaire Portfolio ( available from sets three criteria in selecting investments :

In order

1) forecast for the economy THEN

2) select the sectors to benefit from that forecast And Finally

3) in your own and the Jack A. Bass Managed Accounts, select the stocks that will do best in the selected sectors.

So, first ascertain :

Where are the most important economies ( U.S. and China ) headed in the next 12 to 36 months ?

China’s economy showed fresh signs of resilience in August, with key trade data pointing to a sustained strengthening in global demand for goods from the country.

Exports continued to gather steam, rising 7.2% in August from a year earlier, according to data released Sunday by the General Administration of Customs. This was up from a 5.1% rise in July and a contraction of 3.1% in June. Imports rose 7.0% from a year earlier in August, down from 10.9% in July.

The overall picture was of a Chinese economy benefiting from progressive strengthening of demand in the U.S. and other key export markets. China is also continuing to stock up on raw materials for its industrial sector. “China’s back,” said Stephen Green of Standard Chartered Bank. “It won’t be a strong recovery but it’s increasingly clear we’ve bottomed.”

AND the reason is U.S. growth leading to increased demand for products from China.

One sector that benefits is shipping because that increase will be moved by ships.

AFP/Getty ImagesEnlarge Image

China’s trade surplus strengthens in August on strong exports driven by U.S. demand.

August’s trade numbers are the latest in a series of positive data releases, after overseas sales and factory output in July showed signs of improvement.

There are still some questions surrounding the sustainability of the current upswing.

Rising wages and a stronger currency dent the competitiveness of China’s exports. Beijing’s recent moves to slow lending growth — after years of credit-fueled economic expansion — could curtail investment and imports.

Still, two months of stronger data has increased optimism that the government will be able to hit its full-year target for gross domestic product growth, which stands at 7.5%. It also reduces the chances that leaders will introduce a major new stimulus policy.

Economists have responded to the signs of strengthening by edging up their growth forecasts. J.P. Morgan now expects 7.6% year-on-year growth in the third quarter, up

their growth forecasts. J.P. Morgan now expects 7.6% year-on-year growth in the third quarter, up from a previous forecast of 7.4%, which points to an acceleration from 7.5% growth in the second quarter.

China’s trade surplus widened, with the difference between exports and imports growing to $28.5 billion in August, up from $17.8 billion in July, marking its highest level since January.

Build Your Portfolio On A Solid Foundation : All You Need To Succeed – in 500 pages of Investing Strategy and Selections

Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

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