I could not believe the headline of the following MarketWatch article, so I had to pass it along to Trader Edge Readers: "China companies rush to suspend their shares; more than 40% of all stocks now in halt." The author (Laura He) reports information from the Southern Metropolis Daily, which cited data from "cninfo.com, the market information site sanctioned by China's securities regulator." According to the report, this "marked the largest wave of trading halts in the history of China’s equity markets." Also stated in the report, "many of the halts were likely meant to protect the shares from the ongoing selloff in Chinese markets."
I posted a link to another article on China on Monday. I am not picking on China, but this news is unprecedented. Could you imagine trading in over 40% of the NYSE shares suspended at the same time - primarily for undisclosed reasons?
It is simply not plausible that all of these companies simultaneously had significant events that warranted suspending trading in their shares. It seems obvious that the companies were attempting to avoid further precipitous declines in their share prices, which is naive and hardly likely to instill confidence in the company. What do they think is going to happen when trading resumes? It is more likely to create a panic.
If the board of directors feels the company share price is too low, then they should repurchase shares, not suspend trading. This is very troubling, especially at this scale. As I mentioned on Monday, this is not tiny Greece; China is the world's second largest economy - at least for now.
On a related note, copper prices plunged by 3.5% on Monday, 3.6% on Tuesday, and are down another 0.5% this morning, confirming the troubles in China. Copper is widely considered a leading indicator for the global economy and is closely tied to growth prospects in China.
Keep a close eye on this situation.
Print and Kindle Versions of Brian Johnson's 2nd Book are Available on Amazon (75% 5-Star Reviews)
Exploiting Earnings Volatility: An Innovative New Approach to Evaluating, Optimizing, and Trading Option Strategies to Profit from Earnings Announcements.
Print and Kindle Versions of Brian Johnson's 1st Book are Available on Amazon (79% 5-Star Reviews)
Option Strategy Risk / Return Ratios: A Revolutionary New Approach to Optimizing, Adjusting, and Trading Any Option Income Strategy
Trader Edge Strategy E-Subscription Now Available: 20% ROR
The Trader Edge Asset Allocation Rotational (AAR) Strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes. The AAR strategy has generated annual returns of approximately 20% over the combined back and forward test period. Please use the above link to learn more about the AAR strategy.
Brian Johnson
Copyright 2015 - Trading Insights, LLC - All Rights Reserved.
About Brian Johnson
I have been an investment professional for over 30 years. I worked as a fixed income portfolio manager, personally managing over $13 billion in assets for institutional clients. I was also the President of a financial consulting and software development firm, developing artificial intelligence based forecasting and risk management systems for institutional investment managers.
I am now a full-time proprietary trader in options, futures, stocks, and ETFs using both algorithmic and discretionary trading strategies.
In addition to my professional investment experience, I designed and taught courses in financial derivatives for both MBA and undergraduate business programs on a part-time basis for a number of years. I have also written four books on options and derivative strategies.
More Stunning Developments in China
I could not believe the headline of the following MarketWatch article, so I had to pass it along to Trader Edge Readers: "China companies rush to suspend their shares; more than 40% of all stocks now in halt." The author (Laura He) reports information from the Southern Metropolis Daily, which cited data from "cninfo.com, the market information site sanctioned by China's securities regulator." According to the report, this "marked the largest wave of trading halts in the history of China’s equity markets." Also stated in the report, "many of the halts were likely meant to protect the shares from the ongoing selloff in Chinese markets."
I posted a link to another article on China on Monday. I am not picking on China, but this news is unprecedented. Could you imagine trading in over 40% of the NYSE shares suspended at the same time - primarily for undisclosed reasons?
It is simply not plausible that all of these companies simultaneously had significant events that warranted suspending trading in their shares. It seems obvious that the companies were attempting to avoid further precipitous declines in their share prices, which is naive and hardly likely to instill confidence in the company. What do they think is going to happen when trading resumes? It is more likely to create a panic.
If the board of directors feels the company share price is too low, then they should repurchase shares, not suspend trading. This is very troubling, especially at this scale. As I mentioned on Monday, this is not tiny Greece; China is the world's second largest economy - at least for now.
On a related note, copper prices plunged by 3.5% on Monday, 3.6% on Tuesday, and are down another 0.5% this morning, confirming the troubles in China. Copper is widely considered a leading indicator for the global economy and is closely tied to growth prospects in China.
Keep a close eye on this situation.
Print and Kindle Versions of Brian Johnson's 2nd Book are Available on Amazon (75% 5-Star Reviews)
Exploiting Earnings Volatility: An Innovative New Approach to Evaluating, Optimizing, and Trading Option Strategies to Profit from Earnings Announcements.
Print and Kindle Versions of Brian Johnson's 1st Book are Available on Amazon (79% 5-Star Reviews)
Option Strategy Risk / Return Ratios: A Revolutionary New Approach to Optimizing, Adjusting, and Trading Any Option Income Strategy
Trader Edge Strategy E-Subscription Now Available: 20% ROR
The Trader Edge Asset Allocation Rotational (AAR) Strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes. The AAR strategy has generated annual returns of approximately 20% over the combined back and forward test period. Please use the above link to learn more about the AAR strategy.
Brian Johnson
Copyright 2015 - Trading Insights, LLC - All Rights Reserved.
About Brian Johnson
I have been an investment professional for over 30 years. I worked as a fixed income portfolio manager, personally managing over $13 billion in assets for institutional clients. I was also the President of a financial consulting and software development firm, developing artificial intelligence based forecasting and risk management systems for institutional investment managers. I am now a full-time proprietary trader in options, futures, stocks, and ETFs using both algorithmic and discretionary trading strategies. In addition to my professional investment experience, I designed and taught courses in financial derivatives for both MBA and undergraduate business programs on a part-time basis for a number of years. I have also written four books on options and derivative strategies.