China’s Plunge Protection Team Holds $150 Billion In Stock, Claims “State Meddling” Stabilizes Markets
It was two years ago, in June of 2015, when just as the Shanghai Composite was flirting with 5,000 and when literally the local banana stand guy was trading stocks, that the Chinese stock bubble burst, unleashing an unprecedented selling spree, a 40% drop in just two months, and Beijing’s nationalization of the stock market, courtesy of the domestic plunge protection team, the China Securities Regulatory Commission also known as the “National Team”.
The decision by local authorities to effectively shut down price discovery had a huge confidence crushing impact on local investor confidence. As Gavekal Research put it overnight, “the lack of trust was crystallized by the decision in the summer of 2015 to “shut down” the equity markets for a while and stop trading in any stock that looked like it was heading south. That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.”
Understandably, with the realization that China (or any other nation for that matter), no longer has a an efficient, discounting stock market, but merely a policy tool meant to inspire confidence on the way up, and punish short sellers and “speculators” on the way down, the China Securities Regulatory Commission kept a low profile: after all why remind traders and investors that the local market only exists in the imaginations of several Beijing bureaucrats who sit down every day to decide the “fair value” of all market-traded equities.
That changed last week, when for the first time in years, the Chinese Plunge Protection Team broke its silence and said that “state meddling has successfully stabilized China’s US$7 trillion stock market by curbing volatility and steering valuations to rational levels.”
…click on the above link to read the rest of the article…
