TIME China

Giant Sinkhole Swallows 5 Pedestrians in China

It was not immediately clear what caused the sidewalk to collapse

(BEIJING) — A sinkhole in a northeastern Chinese city swallowed five people in a dramatic scene that was captured on security video and shared widely on Chinese social media.

A provincial broadcaster said four people were injured in the Saturday incident in the provincial capital of Harbin.

The surveillance camera video shows pedestrians walking or standing on the sidewalk when it suddenly gave in.

Three people fell straight into the hole, while a woman clung to pipes just underneath the sidewalk. Another person standing on the edge fell sideways into the hole.

Heilongjiang Network Broadcasting Television said the people were probably waiting for a bus because it occurred at a bus stop. The bus sign also was swallowed by the sinkhole, the broadcaster said.

Passers-by pulled the victims from the hole, which was about 3 meters (10 feet) deep, the broadcaster said.

It said four received minor injuries to their feet, legs, arms and shoulders.

It was not immediately clear what caused the sidewalk to collapse.

MONEY stocks

What to Make of the Market Madness

A man explains the stock market's recent fluxuations on the floor of the New York Stock Exchange during the afternoon of August 26, 2015 in New York City.
Andrew Burton—Getty Images

Will the real market please stand up?

Finally. After six straight down days on Wall Street, stocks surged on Wednesday, with the Dow Jones industrial average gaining a stunning 619 points.

What was behind Wednesday’s rally?

Several things. First, the Chinese government cut interest rates again in an effort to reinvigorate economic growth and restore confidence to that nation’s sinking stock market.

That was followed by remarks from New York Federal Reserve Bank President William Dudley, who argued that in light of recent developments, the case for raising interest rates in September “seems less compelling…than it did several weeks ago.”

Finally, the Commerce Department delivered some good economic news: Last month, factory orders for durable goods rose a better-than-expected 2%.

Why was this last bit of data so important?

The stock market often foreshadows the health of the economy six to nine months down the road. If equities were to slip into a bear market — they came close on Monday — investors would naturally begin to wonder if the U.S. economy is on the verge of another recession.

The fact that orders for expensive, big-ticket items are growing offers some reassurance that the economy is still on solid footing.

Why has the market been bouncing up and down so much in recent days?

Blame it on all the mixed signals investors are getting about the economy.

“You have the leading economic evidence pointing to the positive side,” says James Stack, president of InvesTech Research, noting that consumer confidence, initial claims for unemployment, and growth in the consumer sector are all reflecting a rather rosy picture.

But from a technical stock market view, he says, “things are very negative.” For example, market breadth—the number of stocks posting gains as a percentage of the overall market—has been deteriorating for some time, hinting that the bull market may be over.

As new bits of data or clues about the global economy come to light, investors are overreacting in both directions, which explains the volatility.

Does Wednesday’s rally mark the end of this sell-off?

That’s difficult to say, but many strategists think this downturn will fall short of becoming a full-blown bear market, defined as a 20% drop or more in stock prices.

“We think this is likely to end up being a correction,” not a bear, says Liz Ann Sonders, chief investment strategist for Charles Schwab.

What will the bulls be looking for Thursday?

Follow-through. One day does not a rally make. If yesterday’s 600-point gain is followed by a triple-digit loss, Wednesday’s rally becomes almost meaningless.

What will the bears be watching Thursday?

China. For the past two days, policymakers in Beijing have announced stimulative moves including rate cuts to reassure investors. On both days, Wall Street responded with big moves higher in the morning, though on Tuesday the market’s early gains were wiped out by late-day selling.

For years, Wall Street observers have been noting that investors have grown addicted to low interest rates engineered by the Federal Reserve. As far back as 2012, then Dallas Fed president Richard Fisher described artificially low rates as “monetary morphine.”

The fear is that investors are now getting hooked on yet another set of low rates—this time China’s.

TIME Companies

Somebody in China Has Set Up a Fake Goldman Sachs and Is Doing Business

U.S. Stocks Fall From Record as Microsoft, Google Miss on Profit
Scott Eells—Bloomberg via Getty Images The Goldman Sachs Co. logo is displayed at the company's booth on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on July 19, 2013

Because China

China has been known for ripping off designer goods, iPhones and even public sculpture. Now, financial companies can start worrying about having a Chinese counterfeit too.

American multinational financial giant Goldman Sachs Group Inc. appears to share an English name with Goldman Sachs (Shenzhen) Financial Leasing Co., a financial services company based in the southern Chinese city of Shenzhen. The company also uses the same Chinese moniker (Gao Sheng) as the American one, and even has a similar font for its logo, according to Bloomberg.

A spokeswoman for the American Goldman Sachs, Connie Ling, told Bloomberg that there is no connection between the two companies. A secretary at the Shenzhen company told Bloomberg that no one had ever inquired with her about the similarities.

Name-poaching isn’t the only controversy the company has encountered — it has also been accused of dabbling in money-laundering.

The company first came to light when a U.S. casino workers’ union sent a letter to the Chinese government complaining that the Shenzhen company was linked to the notorious gaming figure Cheung Chi-tai. Chinese prosecutors allege that Cheung in turn has links to organized crime and he is awaiting trial, Bloomberg says.

[Bloomberg]

TIME China

China Accuses 11 Officials of Negligence Over Tianjin Warehouse Blasts

Top transport and port officials are reportedly among those being investigated

Chinese state prosecutors have accused 11 officials and port executives of “dereliction of duty” and “abuse of power” over the huge explosions two weeks ago in the world’s 10th largest port, Tianjin, according to the state-run Xinhua news agency.

The officials under investigation are said to include the head of Tianjin’s municipal transportation commission, We Dai, and the president of Tianjin Port Holdings, Zheng Qingyue.

The blasts, which killed 139 people and injured hundreds more, took place at a warehouse owned by Ruihai International Logistics. Xinhua has also reported that 12 people from the firm — including its chairman, vice chairman and three general managers — have been detained on suspicion of illegally storing dangerous chemicals.

Chinese authorities say the warehouse was used to store about 40 different hazardous chemicals, including 700 tons of highly toxic sodium cyanide, before the deadly explosions on Aug. 12, which devastated a large part of the port area.

TIME Running

Kenyan Runners Test Positive for Doping at World Championships

Joyze Zakary
David Gray—Reuters Mariabenedicta Chigbolu of Italy, Mariya Mikhailyuk of Russia, Christine Day of Jamaica (L) and Joyce Zakary of Kenya (L to R) compete in the women's 400 metres heats during the 15th IAAF World Championships in Beijing on Aug. 24, 2015.

The sport has been hit by doping allegations in recent weeks

(BEIJING) — Two Kenyan runners have tested positive for doping at the world championships and have been provisionally suspended.

Joyce Zakary, a 400-meter runner, and hurdler Koki Manunga tested positive for unspecified substances in targeted tests after competing in Beijing, the IAAF said Wednesday.

Zakary was second in her opening heat on Monday, running a national record of 50.71 seconds in the 400. But the 29-year-old Kenyan did not run in the semifinals a day later despite having the eighth best qualifying time.

Manunga ran in the opening heats of the 400 hurdles on Sunday and finished sixth of seven, failing to reach the semifinals.

“Athletics Kenya has already met with the IAAF and the athletes involved, and has begun investigating the situation which led to these results and appropriate follow-up action will be taken in Kenya,” the country’s national governing body said in a statement. “In the meantime, Athletics Kenya will provide full support and cooperation to the IAAF during (the) results management process, and will not be providing further comment at this stage.”

The Kenyans have 13 athletes currently serving doping suspensions.

The sport has been hit by doping allegations in recent weeks, with German broadcaster ARD and The Sunday Times newspaper in Britain reporting that they had obtained access to 12,000 suspicious blood tests involving 5,000 athletes.

The report says Kenya had 18 medals won by athletes under suspicion over more than a decade.

At this year’s world championships, Kenya was leading the medal standings after four days with four golds and nine overall. Some of those medals were won by veterans, including Ezekiel Kemboi and David Rudisha, who have been tested regularly for years.

TIME Markets

China Is Probing Brokers and Regulators for Possible Stock Crimes

China Financial Markets
Mark Schiefelbein—AP Chinese investors monitor stock prices at a brokerage house in Beijing on Aug. 24, 2015

Brokerages have been accused of improperly allowing customers to trade

(BEIJING) — Chinese authorities are investigating four securities brokerages and one current and one former employee of its securities regulator for possible stock market offenses.

Three of the brokerages say they have been told they are being investigated for possibly failing to confirm the identities of clients. The official Xinhua News Agency said eight employees of a fourth brokerage were suspected of illegal securities trading. The agency said a staff member of the China Securities Regulatory Commission and a former staff member were suspected of insider trading.

Authorities announced in July they were investigating possible misconduct in China’s securities market following the collapse of a stock price boom.

Brokerages have been accused of improperly allowing customers to trade without giving their real names and other violations.

TIME Markets

Asian Stocks Post Mixed Results

Tokyo stock rebounds
Kimimasa Mayama—EPA A businessman watches an electronic board displaying Tokyo's benchmark Nikkei Stock Average at a securities office in Tokyo on Aug. 26 2015

Markets have been zigzagging for weeks

(TOKYO) — Asian stocks were mixed Wednesday and Shanghai’s index fell despite Beijing’s decision to cut a key interest rate to help stabilize gyrating financial markets and counter short liquidity.

The benchmark Shanghai Composite Index fell late in the day after spending most of the afternoon in positive territory. It closed down 1.3 percent at 2,927.29 on heavy selling of steelmakers and other heavy industrials.

Most other Asian markets initially wavered but had appeared to regain buying momentum by early afternoon. Japan’s main Nikkei 225 stock index advanced 3.2 percent to 18,376.83, and South Korea’s Kospi gained 2.6 percent to 1,894.09.

But Hong Kong’s Hang Seng index fell 0.5 percent to 21,305.17, and mainland China’s smaller Shenzhen Composite Index lost 3.1 percent.

Elsewhere in Asia, Australian shares gained 0.7 percent to 5,172.80, helped by buying of resource-related shares. Shares also rose in Taiwan but fell in New Zealand and most Southeast Asian markets.

Many in Asia went to bed Tuesday smiling over China’s decision to slash its key interest rate, only to awaken to yet another decline overnight on Wall Street, Nicholas Teo, an analyst at CMC Markets, said in a commentary.

“All of a sudden, China and the performance of the Chinese markets have now taken the lead in determining daily direction for trading in stocks worldwide,” he said. Meanwhile, investors unable to meet margin calls are being forced to sell, regardless of the Chinese central bank’s decision.

“With confidence in the markets completely shattered, the likelihood of buyers meeting these intermittent bouts of forced selling may just be few and far in-between,” he said.

Markets have been zigzagging for weeks on deepening unease over the ramifications of slowing growth in China, the world’s second-largest economy and the driver of much of the global growth of the past decade.

The apparent inability of Chinese regulators to stabilize the markets, has spooked investors already fretting over when the U.S. Federal Reserve will raise interest rates.

Asia got a slow start following a last-minute sell-off that dragged the Dow Jones industrial average down 204.91 points, or 1.3 percent, on Tuesday to 15,666.44. That extended Wall Street’s losing streak to six days, the longest such stretch in more than three years.

The Dow had surged more than 400 points after China cut its interest rates for the fifth time in nine months in a renewed effort to shore up growth. The central bank also increased the amount of money available for lending by reducing the reserves banks are required to hold.

The People’s Bank of China acted after the Shanghai stock index slumped 7.6 percent on Tuesday, on top of an 8.5 percent loss on Monday.

China’s slowdown is crimping demand for oil and other commodities, a ripple effect that already is slowing exports and other business activity across Asia.

Beyond China, traders are waiting for clarity from the Federal Reserve, which has signaled it could begin raising its key interest rate from near zero for the first time in nearly a decade as early as this year. The Fed isn’t expected to deliver a policy update until it wraps up a meeting of policymakers in mid-September.

In other trading, U.S. crude oil rose 1 cent to $39.32 a barrel in electronic trading on the New York Mercantile Exchange. It rose $1.07, or 2.8 percent, to $39.31 on Tuesday. Brent crude oil, which is used to price international trading, gained 6 cents a barrel, to $43.15.

The dollar rose to 119.35 yen versus 118.66 yen late Wednesday. The euro slipped to $1.1509 from $1.1524.

 

MONEY stocks

Stock Market Slide Is Unlikely to Signal a Bear Market

Asian Markets Continue To Fall on Fears Of China Slowdown
Chris McGrath—Getty Images A man looks at a screen showing global stock market information on the street in Tokyo on August 25, 2015. Japan's share prices dropped nearly 4.0 percent, closing at 17,806.70 following a 4.6% plunge on "Black Monday" to the lowest level seen since late February.

The U.S. economy remains strong despite the market chaos.

Wall Street’s selloff on Monday, sparked by a near-9% dive in Chinese shares, was a long-overdue correction that analysts said is unlikely to undermine support for U.S. stocks going forward.

“We are unlikely to be going into a bear market,” said Jason Ware, chief investment officer at Albion Financial Group, which manages about $1 billion for clients from Salt Lake City, Utah.

“There are a number of positive things happening under the surface of all this chaos and it is easy to forget those things when you see these types of moves,” he added.

After dropping more than 1,000 points, or almost 7%, at Wall Street’s open, the Dow Jones industrial average cut its losses but still finished down 3.6%. The Standard & Poor’s 500 index closed down 3.9% for the day and was 11% lower than its May record high.

An index is considered to be in correction when it closes 10% below its 52-week high. The Dow was confirmed to be in a correction on Friday.

The S&P index has accumulated 9.95% of losses in just five sessions, a correction analysts had been arguing was long overdue and a missing link of a healthy market.

The benchmark index had not had a by-the-book correction in about four years, but there were early signs that markets may begin to stabilize as U.S. stock index futures all rose at the start of the Tuesday session.

Ware and others pinned the early losses on what he called “indiscriminate selling” – automatic trading, forced selling to meet margin calls and the like.

Among the positives he and others cited, the U.S. economy has been seen on strong enough footing to warrant a Federal Reserve interest rate increase, with many expecting one before the end of the year.

While turmoil in world financial markets could undermine Fed expectations that U.S. inflation will start to rise and push back market bets on a rate hike, the U.S. economy remains strong.

The S&P 500 earnings outlook improved as well: Second-quarter expectations now are for a 1.3% increase, sharply above the 3% decline expected at the start of last month.

“Over the course of the next couple of weeks we are going to get a number of data points that reinforce the U.S. economy is frankly in pretty good shape,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.

Coast Not Clear Yet

Buying market pullbacks has been a winning trade for years now, but Monday’s head fake of a rebound may have made a dent on the “buy the dip” mentality.

“I think this time around it may take a little while,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“It may attract a lot of ‘buy the dippers’ but then it failed for a second time. I don’t think you got people focused on fundamentals, there’s little focus beyond emotion and technical trading areas.”

For some, the move at the open had all the hallmarks of a forced liquidation of positions that hedge funds and other big investors had financed with borrowed money.

“There is no reason we should have been able to buy Facebook down at $73 or Apple down at $92. People had margin calls and were getting hit out at whatever prices they could get,” said Steven Spencer, partner at proprietary trading firm SMB Capital in New York. “We were buying a lot of blue chip names, down 5 to 10%.”

Apple closed the day down 2.5% after falling as much as 13%.

As dramatic as the rebound was, however, few would dare say the market has set a bottom. The Fed has been hinting for months at a rate hike, which would be the first in almost a decade and could spook investors into more stock selling.

China’s slowdown could be confirmed by more softening data, which likely would trigger further declines on Wall Street.

“The fundamental reasons why one owns stocks are unbroken. The (U.S.) economy and earnings are holding up,” said Albion’s Ware.

“That said it’s the uncertainty that drives everyone crazy; because no one really knows.”

–Additional reporting by Chuck Mikolajczak, Saqib Ahmed and David Randall

TIME Economy

The Stock Market Could Be Much Calmer Today

Global Markets Continue Last Week's Steep Decline
Spencer Platt—Getty Images A trader works on the floor of the New York Stock Exchange (NYSE) on August 24, 2015 in New York City.

Early indicators point towards a general rebound

China’s has carried on in freefall, but the rest of the world’s stock markets look in much better shape Tuesday, rebounding with vigor after Monday’s sharp declines.

The Shanghai and Shenzhen stock exchanges both lost over 7% earlier, as the government and central bank again decided against intervening during the trading day beyond a modest net injection of 30 billion yuan ($4.7 billion) into the money market. It was another matter after the close, however, as the People’s Bank of China cut its lending rate by another 0.25 percentage point and its reserve requirement rate by 0.50 percentage point, delivering the stimulus that many had hoped for in vain on Monday.

However, most other markets around the region all rose on the perception that Monday’s movement had been overdone, and on hopes that the very volatility caused by fears of the Federal Reserve’s first interest rate hike in nine years might be enough to force Janet Yellen & Co. to stay their hand for at least another month. Australia’s all-share ASX, rose 2.6%, while stock markets in India, Malaysia, Indonesia, South Korea and–most notably–Hong Kong all posted gains on the day.

In Europe, the rebound was even more vigorous, helped by a forecast-beating business survey in Germany that showed the Ifo confidence index at its highest in three months. Germany also confirmed economic growth at 0.4% in the second quarter, with an encouragingly strong performance from domestic consumption. That suggests that Europe’s economic engine may be more protected from the slowdown in China–one of its biggest export markets, accounting for 6% of the total–than it has been in recent downturns.

“German exports to China have already slowed down in the first half of the year, without derailing the German recovery,” said ING-Diba economist Carsten Brzeski. “The geographical diversification of German exporters should cushion any further weakening of Chinese demand.”

Altogether, it’s been the kind of morning where relief has been the dominant emotion. Market analysts are peeping out over the parapet and channelling Anchorman’s Ron Burgundy in their morning notes (“Well, that escalated quickly. Really, that got out of hand fast,” said Deutsche Bank’s Nick Lawson). But prices for stocks, emerging market currencies and commodities still remain largely below where they were on Friday night. Crude oil future are stuck below $40 a barrel despite a 1.4% gain overnight.

Even shares in BHP Billiton Plc [fortune-stock symbol=”BHP”], the world’s largest mining company and heavily exposed to Chinese demand for its commodities, have risen despite its second-quarter earnings falling short of expectations. That’s a measure of how overdone yesterday’s falls are now considered.

It may yet prove to be a fragile and short-lived peace. But the markets will take any peace they’re offered after Monday.

TIME Hong Kong

Hong Kong’s Market Fitfully Recovers but Plenty of Nerves Remain

Experts worry that Hong Kong's close economic links to China mean it is in for a rough ride

Tomy Kwan, a 44-year-old trader at the Hong Kong Stock Exchange, came back from lunch on Tuesday happy, or at least calmer than he had been. The Hang Seng Index had plummeted 5.2% on Monday, bringing the market to its weakest point, by one measure, since the crash of 1987, but within an hour of opening on Tuesday it had soared more than 700 points. By the midday break, things had cooled but were still looking up, bringing a cautious optimism to an anxious trading floor.

“I made some money this morning,” Kwan said outside the doors to One Exchange Square in Hong Kong’s Central district. “I lost a lot of money yesterday, and last week, but I’ve made some back today. We’ll see.”

But by 3 p.m., the Hang Seng Index — the standard barometer of Hong Kong’s market performance — went south again, falling nearly 500 points, or down 1.04% from the opening bell. A sudden spurt of second wind at the end of the day pulled the index ahead, allowing it to close around three-quarters of a percentage point up, but traders left the floor on Tuesday afternoon looking somewhat dazed, blinking as they stepped into the smoggy sunlight.

Hong Kong is not alone in its volatility. The ongoing stock sell-off in mainland China has flamed panic in markets across the world. “Black Monday,” as the Chinese state media (in a rare moment of honest self-appraisal) called yesterday’s rout, encouraged the biggest sell-off in U.S. and European markets since 2011. As things got worse on Tuesday — by close, the indices in Shanghai and Shenzhen had fallen 7.6% and 7.1%, respectively — the rest of Asia followed suit, with India’s Sensex and the Nikkei in Japan both taking a tumble immediately after lunch.

However, while the markets of New York City and Tokyo are liable to recover, some experts worry that Hong Kong could be along for China’s downward ride. The political turmoil in this island city last autumn demonstrated that many Hong Kongers hold themselves proudly detached from the political and cultural influence of mainland China, but the ties between them, at least in economic terms, may be too tight to ignore.

“The closeness of Hong Kong market means that it moves more or less with the Chinese market,” Bernard Aw, a market analyst with IG Group in Singapore, tells TIME. “If you look at the Hang Seng market, 20% of it is Chinese companies incorporated in China that are listed in Hong Kong.”

In recent years, Aw says, China has used Hong Kong as a pawn in its efforts to open the country’s markets to foreign investment. Investing in Hong Kong, a bastion of free-market capitalism on the southern cusp of this self-proclaimed communist country, is easy, and therefore Chinese companies listed on the Hong Kong markets — comprising half of the overall market here — can avail themselves of foreign money. The Shanghai and Shenzhen markets draw domestic investment; Hong Kong bolsters that with investments from overseas.

In short, Hong Kong’s stock markets have subjected themselves to the dual currents of Chinese and global market trends. The apogee of its surge earlier this year — reaching its highest value since January 2008 — echoed the bullish run of China’s markets, which were also booming. Since June, when investors began to realize that the Chinese bubble was just that, Hong Kong’s markets have suffered accordingly.

“If we’re looking at a farther horizon — 12 to 24 months — there’s a chance for both markets to recover,” Aw says. “But in the near term, I see the trend heading south.”

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