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Soothing China’s markets back to recovery

By NexChange
Capital Markets

Unusual times require desperate measures. “War-war” on collapsing stock prices and malevolent investors gave way to “jaw-jaw” over the weekend, as China’s central bank governor tried to calm markets with soothing words.

The “correction in the stock market is almost done” and China’s financial markets should become “more stable” after the currency steadies following last month’s devaluation, PBOC head Zhou Xiaochuan told G20 government finance leaders on Saturday (The Wall Street Journal).

Here’s a recap of the main attempts by China, usually through the China Securities Finance Corp, to boss the markets during the past couple of months:

Sets up stabilization fund to buy shares
Lends cash to 21 local brokerages to prop up equity prices
Announces massive monetary stimulus and state spending to boost the economy
Cuts interest rates
Allows about half of listed companies to halt trading in their shares
Bans major shareholders from selling their stakes for six months
Threatens short sellers with arrest
Suspension of all IPOs
Relaxes rules on collateral for margin trading - that had inflated the stock bubble in the first place
Devalues the renminbi
Finds scapegoats: identifies, parades or punishes malicious traders, journalists and foreign investors apparently responsible for the rout.
Intends to install circuit-breakers on exchanges to prevent panic selling

Posturing, waving the stick, intimidating, imposing arbitrary rules – all weapons of the blustering bully. Maybe charm and soft-soap will work instead and help the market gain a bit of confidence.
Photo: 2 dogs

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