The oddest things about China's $7.4 trillion stock market

China may be somewhat of a mystery to the majority of international investors who will soon find themselves owning mainland shares for the first time.
The country’s main bourse, opened in Shanghai in the early 1990s, is accessible only through a link with Hong Kong or using either of two licences available to institutions like insurers or pension funds, both of which impose quotas and limitations. There will be a third route come Friday, when anyone tracking MSCI Inc’s indexes will be forced to own a piece of the 234 companies that were picked for inclusion this month.

A gauge tracking Shanghai shares has taken quite a beating in the past six days, closing Wednesday at its lowest level since October 2016. While the bearish sentiment hardly bodes well for China’s big debut, it does mean foreigners are getting in at the cheapest valuations in more than two years. Below are seven things that outsiders might find strange about China’s $7.4 trillion equity market, the second-largest in the world.

Cryptocurrency chaos as China cracks down on initial coin offerings

China's move last week to ban initial coin offerings (ICO) has caused chaos among start-ups looking to raise money through the novel fund-raising scheme, prompting halts, about-turns and re-thinks.

China is cracking down on fundraising through launches of token-based digital currencies, targeting ICOs in a market that has ballooned this year in what has been a bonanza for digital currency entrepreneurs.

The boom has fuelled a jump in the value of cryptocurrencies, but raised fears of a potential bubble.

"This is not unlike the dotcom bubble of 2000," said a partner at a venture capital fund in Shanghai, who didn't want to be named because of the issue's sensitivity. "There are a lot of companies raising a lot of money for not very good ideas, and these will eventually be weeded out. But even from the big dotcom bust, you still have gems."

"One of the reasons regulators stepped in was that the ICO fever extended beyond the traditional crypto community. The timing was an attempt to pre-empt this before it goes into a much broader mass market in China," the partner said.

Investors in China contributed up to 2.6 billion yuan ($394 million) worth of cryptocurrencies through ICOs in January-June, according to a state-run media report citing National Committee of Experts on Internet Financial Security Technology data.

Pre-ICO roadshows featuring elaborate standing room-only presentations at 5-star hotels drew a diverse crowd, including grandmothers - a likely tipping point for regulators.

The hype and subsequent crackdown came as China focuses on economic and social stability ahead of next month's congress of the Communist Party, a once-in-five-years event.
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Chinese regulators to rein in $3 trillion shadow banking industry

As a flood of unregulated cash swirls through the Chinese economy, Beijing has been taking aim at the trust companies whose unrestrained lending practices are worrying regulators.

The trusts, at the heart of a vast shadow banking industry, are being pressured to step up compliance and background checks, and are being pushed towards greater transparency.

But the fast-growing 20 trillion yuan ($3 trillion) industry, whose lending operations are cloaked behind opaque structures, will be tough to rein in, according to employees at some trusts.

A regulatory sanction against one trust, Shanghai International Trust, and a legal case against another, National Trust, offer rare insights into the industry, and reveals just how hard it will be to police it.

Shanghai Trust was fined 200,000 yuan for selling a product that violated leverage rules, according to a regulator's notice in January. Regulators provided no further details about the case. Under these rules, property developers are only allowed to borrow up to three times their existing net assets.
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Apple doubles down on China as local rivals pull ahead

Apple Inc is binding itself more closely to China as its share of the world's biggest smartphone market slips and it becomes more reliant on selling services which require government approval.

A flurry of recent action by Cupertino-based Apple underlines its push to get on the right side of China's notoriously tough tech regulators, as it looks to revive sales there.

This weekend it moved to block apps used to evade the country's internet censors, a decision that fits with Beijing's recent crackdown on unapproved online content. And Apple has announced it will establish its first China data centre in the politically important province of Guizhou and has created the new position of a managing director for Greater China, reporting directly to CEO Tim Cook.

Apple's China revenues have stalled, falling for a fifth straight quarter in January-March, when sales grew in every other region. China recently slipped to Apple's third-largest market, as consumers have switched to newer domestic offerings. The buzz around new launches has also cooled since the iPhone 6 in 2014.

When it unveils quarterly earnings later on Tuesday, Apple is likely to report another dip in China smartphone sales. Its once coveted iPhone has slipped into fifth position behind offerings from local rivals Huawei, Oppo, Vivo and Xiaomi, analysts said.
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AirAsia flight 'shaking like washing machine' had technical faults

An AirAsia flight to Malaysia was forced back to Australia on Sunday due to a technical problem, with one passenger saying the plane was "shaking like a washing machine".

The Airbus A330 from Perth to Kuala Lumpur experienced problems about 90 minutes into the journey.

It landed safely, with Perth Airport reporting a "technical issue".

"The pilot identified technical issues, turned around and returned," an airport spokesman told AFP, adding that emergency crews were put on standby but not needed.

The Malaysian low-cost carrier said only that "flight crew are taking precautionary measures to check the aircraft".

It was the second scare involving an Airbus A330 in Australia this month, with a China Eastern plane making an emergency landing in Sydney after a huge hole appeared in one of its engine casings.

Terrified passengers on that flight described a very loud noise soon after it left Sydney for Shanghai. No one was hurt.

The West Australian newspaper cited passengers on Sunday's flight as saying they heard a bang and then the plane started shuddering.

"You could tell by the cabin crew's reaction that it was really bad," said Sophie Nicolas, who said she heard a small explosion from the left wing. "It was terrifying."

Another passenger, Brenton Atkinson, told the Australian Broadcasting Corporation the whole plane started shaking, far more than standard turbulence.
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Nawaz Sharif appears before panel probing Panama money laundering case

Prime Minister Nawaz Sharif on Thursday appeared before a Supreme Court-appointed team probing the Panamagate graft case, becoming Pakistan's first sitting premier to depose before such a panel.

"The day that creates history and sets a much required and welcome precedent for others to emulate," Sharif's daughter Maryam Nawaz tweeted along with pictures of the PML-N leader and his top aides just before leaving for the Judicial Academy - the JIT's temporary secretariat - amid tight security.

The Joint Investigation Team (JIT) chief Wajid Zia had summoned the prime minister to appear before the six-member probe team on June 15 with all documents relevant to the case.

The summons was issued to Sharif after he returned last Saturday from Kazakhstan where he had attended the Shanghai Cooperation Organisation (SCO) Summit.

In its judgement of April 20 in the Panama Papers case, the Supreme Court had constituted a JIT and empowered it to summon the prime minister, his sons and any other person necessary, to investigate allegations of money-laundering, through which the four apartments in London's posh Park Lane area were purchased.

Sharif has denied any wrongdoing.

The Joint Investigation Team had questioned Sharif's sons -- Hussain and Hasan -- last month over the family's alleged improper business dealings.

His eldest son Hussain was questioned five times while Hasan, the younger son, was summoned twice.

The court last year took up the case and issued a split decision over allegations of money laundering when Sharif was prime minister in 1990s.
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Asian stocks retreat from highs after Trump tax plan

Asia stocks ticked down from a near two-year high on Thursday after a long-awaited U.S. tax plan failed to inspire investors, though sentiment remains supported by global growth prospects and receding worries about political risks in Europe.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent after hitting its highest level since June 2015 on Wednesday. Japan's Nikkei dipped 0.3 percent.

U.S. President Donald Trump proposed slashing tax rates for businesses to 15 percent from the current 35 percent for public corporations and 39.6 percent for small businesses, and on overseas corporate profits returned to the country.

But the one-page plan offered no specifics on how it would be paid for without increasing the deficit, which many analysts think would be difficult to achieve.

"There were no specifics in terms of funding for the tax cuts. The announcement appeared many thins are still in flux," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

On Wall Street, the S&P 500 ended down 0.05 percent, failing to cling to earlier gains made on optimistic views on corporate earnings.

Overall profits of S&P 500 companies are estimated to have risen 11.8 percent in the first quarter, the most since 2011, according to Thomson Reuters I/B/E/S.

The world's share markets have been bolstered by relief over the first round of the French presidential election and also by signs of solid global economic growth in recent months.

The disappointment on the tax plan prompted fall in U.S. bond yields and the U.S. dollar.

The 10-year U.S. Treasuries yield slipped to 2.304 percent from two-week high of 2.350 percent touched earlier on Wednesday.

The euro traded at $1.0908 , having bounced back from Wednesday's low of $1.0856 and near its 4 1/2-month high of $1.09515 touched on Wednesday.

The ECB is scheduled to hold a policy meeting on Thursday, with the focus on the potential for a scaling back of monetary stimulus in the months ahead.
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