China Fights Market Collapse – Gold Goliath

Posted on :Aug 04, 2015

Gold prices are steady in a.m. trading Tuesday with bargain hunting and short covering. Gold last reported a.m. is $1094.90 and silver is $14.70.

China is unveiling rules to make it more difficult for speculators to profit from hourly price changes, as many of the nation’s major brokerages suspended their short-selling businesses.

China’s stock exchanges are putting the heat on short-sellers as part of a government-run effort to prevent a collapse in the country’s markets, which have lost almost 30 percent of their value since peaking in June.

The sell-off, which followed a dizzying rally, has decimated confidence in Chinese stocks and shaken the faith of some foreign investors in the ability of the ruling Communist Party to maintain stability of the financial system.

The Shanghai and Shenzhen exchanges said in separate statements on Monday night that new rules, effective immediately, banned traders from borrowing and repaying stocks on the same day – a step that raises risks for short-sellers.

According to Zero Hedge, After trading limit-down on Monday when Greek stocks opened for trading for the first time since PM Alexis Tsipras called a referendum that would later prove to be a complete waste of time, shares of Greek banks once again flirted with the daily 30% loss limit on Tuesday as there were simply no bids for a set of institutions that everyone knows is insolvent.

The banks, which are only operational because the European Central Bank decided to keep the ELA liquidity drip on at least until the central bank sees whether or not Greece will be able to make a 3.2 billion euro bond payment on August 20, are in desperate need of recapitalization, and according to Brussels’ estimates, will need somewhere on the order of 25 billion euro to stabilize the system.

Of course that total effectively grows by the day, as the collapsing Greek economy (and we mean “collapsing” in the most literal sense of the word after yesterday’s bad PMI print) takes its toll, driving up NPLs in a vicious circle wherein capital controls meant to stem the deposit outflow cripple the economy which in turn serves to further cripple the banks.

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