geopolitics China Great Game
China has always been in the crosshairs of the West's 'Great Game'
Here is a brief sample of some of the measures the Chinese government and the PBOC have unleashed in just the past ten days to prop up the crashing market include:
  • a ban on major shareholders, corporate executives, directors from selling stock for 6 months
  • freezing more than half (1400 at last count per Bloomberg) of the listed companies from trading,
  • blocking fund redemptions, forcing companies to invest in the market,
  • halting IPOs,
  • reducing equity transaction fees,
  • providing daily bailouts to the margin lending authority,
  • reducing margin requirements,
  • boosting buybacks
  • endless propaganda by Beijing Bob.
The measures are summarized below.

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But it wasn't until last night's first official threat to "malicious" (short) sellers that they face charges (i.e., arrest), as Xinhua reported yesterday:
[Ministry of Public Security in conjunction with the recent Commission investigation of malicious short stock and stock index clues ] correspondent was informed on the 9th morning , Vice Minister of Public Security Meng Qingfeng led to the Commission , in conjunction with the recent Commission investigation of malicious short stock and stock index clues show regulatory authorities to the operation of heavy combat illegal activities.
And SCMP confirmed:
China's police will investigate clues pointing to potentially "malicious" short-selling of Chinese shares, state news agency Xinhua says on Thursday. The investigation will allow authorities to "punch back" against unspecified illegal activities, Reuters reports Xinhua saying on its official microblog, citing unidentified sources.
... that the wall of Chinese intervention finally worked. For now.


Comment: More evidence of the extent to which the global markets are rigged. The odds are never in our favor:

And since this is all about one thing, the stock, market, it is worth noting that the Shanghai Composite Index had dropped as much as 3.8% to a 4 month low before the news that the cops were going to arrest anyone who used a wrong discount rate in their DCF, when everything suddenly took off, and the SHCOMP closed a "Dramamine required" 5.8% higher, the biggest daily increase since March 2009!

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"As China beefs up its efforts to rescue the market, with even the public security ministry involved, market sentiment is recovering slightly from a panicky stage earlier," Shenyin Wanguo analyst Qian Qimin says by phone

This is how some other Chinese markets fared: CSI 300 +6.4% led by industrials, consumer staples; the Shenzhen Composite Index +3.8%; all ChiNext shrs trading today were limit up a day after virtually the entire market was locked limit down.

The best and briefest summary comes from China Southern Fund Management chief strategist Yang Delong, who said that the government efforts "hit the right spot." Well, yes, when you threaten to arrest sellers, it does tend to have a short-term effect. The only escalation from there is arresting anyone who doesn't buy which in turn would promptly lead to this.

Elsehwere in Asia, the Nikkei 225 closed +0.60% after tumbling 3.2% earlier in the day, as the Chinese "anti-selling measures" spread and "inspired' confidence, with the ASX 200 unchanged and weighed by materials as iron fell to a record low. Across the board equities did pull off worst levels as gains in Chinese stocks sparked an improvement in confidence, which also weighed on JGBs, with losses exacerbated by a weak 30-year JGB auction which drew the lowest b/c since 2004.

The Chinese gain promptly rippled through Europe as well, which now appears more focused on Asia than on Greece, and European shares rose most since July 1. Ironically, for all the talk of an imminent deal, overnight none other than famous Grexitologist, Citi's Willem Buiter allowed us a 2011 deja vu when he joined JPM in saying that Greece's exit from Eurozone is now the "base case" and most likely outcome, either via short-term exit in next few months or over next 1-3 years.

Curiously the Greek bond market seems to agree as can be seen by the price action in Greek 2 year bonds.

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In any event the euphoria over Chinese central planners threatening with bodily harm in what is clearly one of the last steps before all control is lost, is enough to offset the unpleasant encroaching of reality. One wonders just what measures the US itself will take when faced with China's bursting-bubble predicament.

For now, however, after US stocks tumbled yesterday just before the NYSE "unexpectedly" closed for nearly 4 hours a day after 70% of Chinese stocks were frozen from trading, futures right now are set for a 1% open.

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