Thursday, 27 December 2018

China Shows Mnuchin How It's Done As Beijing's Plunge Protection Team Reverses Stock Rout


One day after Steven Mnuchin convened the President's Working Group on Financial Markets, also known as the Plunge Protection Team, only to see a record Christmas Eve drop in US stock markets, China showed the US how market manipulation is done.

With only a handful of Asian markets open on Christmas Day, and with Nikkei 225 plummeting 1000 points as Japan's blue chip index closed a whopping 5% lower and entered a bear market, China's stocks similarly started the day off on the back foot with both the Shanghai Composite and the SSE 50 Index of the country’s largest stocks sliding around 2.5% in early trade. However all that reversed in the afternoon session when the Chinese National Team came in and started buying mostly financial stocks, lifting the country's markets and pushing the Composite back over 2,500, ending with a loss of just 0.9%.
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"The gains by big banks and insurers suggest state buying, and some funds may also be bottom-fishing stocks," said Dai Ming, a fund manager with Hengsheng Asset Management. Kang Chongli, a Beijing-based strategist with Lianxun Securities told Bloomberg that the 2,500 level "is both a policy and technical bottom" for the Shanghai Composite Index. The index closed just above it, at 2,504.82.

Just like the now confirmed Plunge Protection Team, China’s "national team" of state-backed funds often buys shares during turbulent times. Large caps like banks are among the most favored targets, and buying often comes in the afternoon so gains, or at least smaller losses, are locked in for the day.

Tuesday's re-emergence of the Chinese plunge protectors will come as a relief to struggling local investors after Goldman found that, inexplicably, in the third quarter the National Team was a net seller of RMB104 BN in stocks, the biggest quarterly sale by the National Team since the Chinese stock bubble popped in late 2015.
https://www.zerohedge.com/news/2018-12-25/china-shows-mnuchin-how-its-done-beijings-plunge-protection-team-reverses-stock

[Posted at the SpookyWeather blog, December 27th, 2018.]

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