Meanwhile in China....

Generali

Anyway, moving back from the non-bubble in Ireland to the non-bubble in China which thus can't be bursting:

http://www.bloomberg.com/news/articles/2015-07-02/chinese-stocks-fluctuate-in-volatile-trade-after-support-steps

China’s Shanghai Composite Index fell below the 4,000 level for the first time since April, as margin traders continued to unwind positions amid doubts over the effectiveness of government measures to support equities.
The benchmark stock index slumped 3.5 percent to 3,912.77 at the close. The gauge has tumbled 24 percent from its June 12 peak, helping wipe out at least $2.4 trillion of value. Fifteen stocks dropped for each one that rose Thursday, with industrial, power and commodity shares leading losses.
The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past. While China’s securities regulator eased margin-trading rules and the nation’s exchanges announced fee cuts overnight, the moves failed to revive confidence in a market that has wiped out the equivalent of France’s entire equity capitalization in three weeks.
“Four thousand is the psychologically critical level that should not have been broken,” said Castor Pang, head of research at Core Pacific Yamaichi in Hong Kong. “The government will have to and need to come up with more measures otherwise the market is poised to drop further.”
Margin debt on the Shanghai Stock Exchange fell to 1.33 trillion yuan ($214 billion) on Wednesday for an eighth day of losses, the longest stretch of declines since the city’s bourse began to compile the data in March 2010. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150 percent gain in the 12 months through June 12.
Support Level

Analysts from Macquarie Group Ltd., Partners Capital International and Guosen Securities Co. all speculated this week that authorities would intervene to keep the index above 4,000. Evidence of government support at key levels stretches back to at least June 2005, when the Shanghai gauge fell below 1,000. The regulator responded by urging funds to stabilize the market and allowing companies to buy back their own shares.

It's all a bit 1929 in China ATM I think. Huge stock exchange positions held via margin (borrowing) and the market falling fast.

Generali

cells wrote: »

Your own link says the market is back to what it was in April just what 3 months ago?

also thay the index now at 4000 was at ~2000 for most of 2013&2014

Yes, that is correct.

The market is constrained from falling to an extent because any stock falling 10% in a day is suspended from trading.

When we have had days when the market has been down 7-8% then many or perhaps even the majority of stocks will simply be suspended.

cells

What would happen if there was a company call abc ltd with a share price of £100

If someone placed a big buy order for £49
And then a big sell order for £50

What would happen to mr margin trader?

Generali

cells wrote: »

What would happen if there was a company call abc ltd with a share price of £100

If someone placed a big buy order for £49
And then a big sell order for £50

What would happen to mr margin trader?

Nothing unless the trades were executed. In that case we have someone asking £50 to sell stock and someone else bidding to buy at £49. If those are the only two orders in the market, the market price will remain at £100 where the last trade was matched.

The maximum price a buyer will pay is less than the minimum sale price a seller will accept so there is no deal.

There are caveats as your broker may be able to change the margin terms in case of an illiquid market which this clearly is as to sell your stock you will ~halve the market price. That would depend on the terms you signed with your broker.

In reality under normal market conditions that situation is unlikely to occur for any stock that trades in reasonable sizes.

chewmylegoff

cells wrote: »

What would happen if there was a company call abc ltd with a share price of £100

If someone placed a big buy order for £49
And then a big sell order for £50

What would happen to mr margin trader?

If the share price is currently £100 that means the mid point of the current bid/offer spread is £100. For instance there may be a buy order for 1,000 shares at £99 and a sell order for 1,000 shares at a price of £101.

If you come along and put an order to buy 500 shares at £49 and to sell £500 shares at £51, your buy order would probably be rejected by the market - depends on their rules but most markets won't accept orders which are more than a certain % away from the current touch, your sell order is effectively an order to sell 500 shares at the best price available with a limit of £51 being the lowest price you are prepared to accept.

As someone else is bidding for 1,000 shares at £99, you will aggressively hit that bid and sell them 500 shares at £99 (assuming the market's pre-trade controls let you actually put a sell order with a limit that low onto the order book).

The market price will be unaffected as there are still 500 shares on the bid at £99.

Mr margin trader is unaffected because the price has not moved.

If, as generali has assumed, there are no other orders on the order book then the stock is so illiquid that there wouldn't be any margin trading in the first place.

Generali

chewmylegoff wrote: »

If the share price is currently £100 that means the mid point of the current bid/offer spread is £100. For instance there may be a buy order for 1,000 shares at £99 and a sell order for 1,000 shares at a price of £101.

If, as generali has assumed, there are no other orders on the order book then the stock is so illiquid that there wouldn't be any margin trading in the first place.

Normally the 'price' is the price at which the last trade was struck. In a liquid market that would be the mid point between the bid and ask.

Back in China:

http://www.businessinsider.com.au/chinese-stocks-got-hosed-again-2015-7

Chinext is now down over 35% since peak and the Chinese Government is trying to ban short selling. The problem is, of course, long sellers trying to exit positions for which there isn't a bigger fool prepared to pay more any longer.

TickersPlaysPop

All of these complex smoke and mirrors trade produce are just a way to legalise theft. It is all generated from nothing, electronically created from nothing but debt.... money created by willingness or blindness to become slaves.... or the small chance of rising above the rest to become one of the glitterati.

I have been raising the China issue every few months .....even Mark Carney had it on his top 5 threats to the UK economy.

The debt bubble of 2008 created by those complex trading products shifted to China.... The slump in global demand meant China had to borrow and build to keep afloat and prevent a revolution from a huge recession.

They have over done it due to lack of financial control and corruption.

So the thing is.... our banks were too big to fail, has China become too big to fail?... If so .... what happens next.... Who picks up the debt disease next.... Africa?

cells

TickersPlaysPop wrote: »

All of these complex smoke and mirrors trade produce are just a way to legalise theft. It is all generated from nothing, electronically created from nothing but debt.... money created by willingness or blindness to become slaves.... or the small chance of rising above the rest to become one of the glitterati.

I have been raising the China issue every few months .....even Mark Carney had it on his top 5 threats to the UK economy.

The debt bubble of 2008 created by those complex trading products shifted to China.... The slump in global demand meant China had to borrow and build to keep afloat and prevent a revolution from a huge recession.

They have over done it due to lack of financial control and corruption.

So the thing is.... our banks were too big to fail, has China become too big to fail?... If so .... what happens next.... Who picks up the debt disease next.... Africa?

maybe you could post an educational you tube cartoon to explain it all?

meanwhile in china they continue to feed sustain and improve the lives of 1.4 billion people

michaels

IN China they have the same problem that caused the financial crisis, high income inequality lending to too little consumption from income and excess saving, the savings glut leading to a misallocation of resources/mispricing of risk.

In the west it was then unsustainability of borrowing to consume that burst the bubble (see Greece).

In China it looks like excessive investment in infrastructure/production with negative real returns will be what brings the cards tumbling down.

Both problems mirror the 30s although China even more so.

Sapphire

So as a result of all this, do you think there will be a mass sell-off of so-called 'luxury apartments' bought by the Chinese in London as investments? (I seem to remember they are/were buying them almost like sweets at one stage.) Would help the housing shortage in London if this happened, and perhaps contribute to a lowering of prices…