China Just Started Nationalizing Its Stock Market

Tyler Durden's picture

Last week we presented China's latest bazooka in its ongoing attempt to halt its plunging market (apparently threats to arrest sellers were insufficient) - China Securities Finance Corp. As a subsidiary of the China Securities Regulatory Commission, this meant that "China’s central bank is now underwriting brokerages’ margin lending businesses" and that "the PBoC is now in the business of financing leveraged stock buying."

If this sounds suspiciously like US' own plunge protection team, it is because that's precisely what it is. This is how Bloomberg presented it: "China has created what amounts to a state-run margin trader with $483 billion of firepower, its latest effort to end a stock-market rout that threatens to drag down economic growth and erode confidence in President Xi Jinping’s government.

China Securities Finance Corp. can access as much as 3 trillion yuan of borrowed funds from sources including the central bank and commercial lenders, according to people familiar with the matter. The money may be used to buy shares and provide liquidity to brokerages, the people said, asking not to be named because the information wasn’t public.

 

While it’s unclear how much CSF will ultimately deploy into China’s $6.6 trillion equity market, the financing is up to 25 times bigger than the market support fund started by Chinese brokerages earlier this month. That’s probably enough to restore confidence among China’s 90 million individual investors, says Bocom International Holdings Co.

It remains to be seen if coinfidence in a rigged, manipulated and centrally-planned market (no, not the S&P500, the Shanghai Composite) has been restored: for now the "market" has been slowly levitating, with the vicious volatility of early July seemingly gone, but while the selling persists, it appeared as if there was someone actively soaking up all that was offered for sale.

Now we know this is preicsely what happened.

According to China Daily, the "recent overweighting to stem A-share plunge has made China Securities Finance Corp (CSF), central bank-backed refinancing institution, among top 10 shareholders of many listed-firms, reported Securities Times on Wednesday."

Among its various other investments, at least eight firms have confirmed that the CSF is now a top-10 shareholder, "which include property developer Dulexe Family, Hualan Biological Engineering, resource purifying developer SJ Environment Protection, Yunnan Tin Company Group, Fujian Cosunter Pharmaceutical Co, Hunan Er-Kang Pharmaceutical Co, digital map provider NavInfo Co, and retailer Friendship & Apollo."

The CSF has been listed as the second-largest holder of tradable shares at Cosunter Pharmaceutical, third largest at SJ Environment Protection, and fifth-largest shareholders at Yunnan Tin Company, according to the Times citing disclosures to Shanghai and Shenzhen stock exchanges.

 

Some listed companies dismissed the disclosing request for regulatory reasons, said the newspaper.

 

According to Securities Law, investors holding more than 5 percent stake of a listed company shall file a written report to China Securities Regulatory Commission and stock exchanges and notify the company to release an announcement within three days.

So having tried everything else, the PBOC is now gobbling up all stocks being actively dumped by those who are unfazed by threats of arrest and persist with "malicious selling." We wonder how long until the CSF runs out of its half a trillion "dry powders" allotment and images such as this one become routine once again.

 

Then again, this is nothing that the US Federal Reserve itself has not done, either standalone or in conjunction with Citadel's spoofing prowess. In fact some may say that even when manipulating their market, the communist central planners in Beijing have more integrity - unlike the US, at least China's PPT is kind enough to reveal it holdings.

Good luck getting a FOIA into the Goldman-controlled NY Fed that will reveal even one of the equity holdings of the biggest hedge fund in the world located at 33 Liberty street.

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pcrs's picture

Where is the SNB? They love to buy plunging Apple stocj as well.

Publicus's picture

Nationalized! The second chapter of Socialism with Chinese characteristics starts now!

HonkyShogun's picture
HonkyShogun (not verified) Publicus Jul 22, 2015 2:45 PM

Do they have to pretend it comes from Carribean-based investors as well?

wee-weed up's picture

The US stock market was "Nationalized" long ago...

DetectiveStern's picture

Wake me up when the workers own the majority of stocks.

Beatscape's picture

Amid the recent turmoil in China’s stock markets, as values plummeted from all-time highs, doctors have reported a surge in what they’re calling gupiao jiaolü zheng, or “stock market anxiety syndrome.”

Experts in Chinese traditional medicine said playing the stock market is dangerous because it can stir up unhealthy emotions, such as fear and shock.

“If you’re not mentally strong, don’t go play in the market,” said Fan Yongping, director of the Chinese Medicine Department of Beijing Tiantan Hospital.

With volatility persisting in the markets, state news media outlets have offered several cautionary tales about stock market anxiety syndrome. Global Times recounted the story of Frank Feng, a 26-year-old financial news reporter in Beijing who lost around 60,000 renminbi, nearly all his savings.

“He was very dedicated to work and liked to socialize with people, but now he has become extremely moody and is on the verge of a nervous breakdown.”

http://sinosphere.blogs.nytimes.com/2015/07/22/turmoil-in-chinas-stock-markets-takes-a-psychic-toll/?_r=0

g speed's picture

looking at the picture i would say its not the losing of the money so much as the near death ass whipping they will get at home when the old man finds out they sold the farm to play the stocks

Antifaschistische's picture

I don't fully understand the mechanics of what is going on in China.  But if a public company has authorized, but unsold stock.   Does the government stepping in as a prop buyer, incentivize companies to start dumping additional (previously unissued) shares onto "the market"?

Hope Copy's picture

Not a good idea unless you (the company CEO, etc) has a jet ready on the tarmac and a nice place to go (outside of China). 

Bush Baby's picture

We wonder how long until the CSF runs out of its half a trillion "dry powders" allotment and images such as this one become routine once again.

Well there's plenty more where that came from, just print some more


Captain Debtcrash's picture
Captain Debtcrash (not verified) pcrs Jul 22, 2015 2:37 PM

Not that the US has a track record that’s much better lately, but the latest crash has shown  China’s inability to give up any control to the free market which will hinder it in the upcoming monetary shift.  

i_call_you_my_base's picture

Didn't Janet meet with the PBOC governor a month or two back? Offering up some intervention pro-tips? Or just a standard leak meeting? Perhaps both.

KnuckleDragger-X's picture

Money is the answer and it doesn't matter what the question is as long as you own the printing press.......

Kaervek's picture

What the fuck are they thinking? Let's do it like the USA? Only they can't really export inflation and war, so their people are going to pay the price for this once agian.

CHC's picture
CHC (not verified) Jul 22, 2015 2:55 PM

I got some Chinese food today.  The fortune cookie said: LEARN CHINESE then there was all these weird lines and gibberish. 

Implied Violins's picture

Really? Last time I got Chinese, the cookies had no fortunes...

Berspankme's picture

These chinese just don't get it. Buy stawks and hold 'em. Never ever sell. Uncle Depends Buffett says so

youngman's picture

Its a communitst country...so in the end they do own everything.....this is just to show who is in charge..they did it without the tanks in the streets too...but they need the flower boy as a symbol....

debtor of last resort's picture

There you have it; Fuk Yu Tu !

Downtoolong's picture

“One vast and ecumenical holding company,
For whom all men will work to serve a common profit,
In which all men will hold a share of stock,
All necessities provided,
All anxieties tranquilized,
All boredom amused”

Network, 1976

Unfortunately, we all know how this ended for Howard Beale, the voice and spirit of the truly free and independent. He gets sacrificed on live TV taking five slugs to the chest in a blaze of gunfire.

Yen Cross's picture

  I hear you get free 'Spiderman Towel' if you buy Chinese ETF... You get defective toaster if you sell.

GotGalt's picture

Toaster is only defective after they throw it into your next bath.  China's take on nailgunning.

InsanityIsWinning's picture

This is what happens when free markets do not behave the way governments want them to.  No losers allowed, only all winners . . . that's not a market.  Same for Japan, and us after a 25% drop . . .     

godiva chocolate's picture

How is this any different than the US govt bailing out GM or the banks?

headhunt's picture

None, except the US was first and are trusted more then a communist country.

The US is only 'Commie Light'

Hope Copy's picture

There is a very big difference.  When GM was 'bailed out' it kept DOGE and that famously ugly PT cruzer from dominating the highways and Mercedies from taking the loot home to Germany.  In this case, China is kicking out those that are cashing in, that is out of the country and they are heading this way.  Maybe not quite to 'Merica, but defenatly to Vancouver, Mexico, Costa Rica, Panama and all those countries that have illicit connections to the US economy, or better known as the Black Market.  Thus, the paper that they run with, US T-bills and US bonds will be hitting out shores, directly or indirectly at any discount that they yield.  Fathom that.

BoPeople's picture
BoPeople (not verified) Jul 22, 2015 3:33 PM

OK, so difference does it make is the CSF or GSJPMCBACMS Corp owns all the stock or it is held as collateral on their books for loans to their insider network?

Makes no difference. It is all just a concentration of assets in the hands of the banking. There are no markets. There are no public companies.

headhunt's picture

This is why China has a very long way to go before becoming the reserve currency of choice...and oh yeah; PSST - their communists.

Gambit's picture

They're Communist* Although, I hate it when people do this to me, fucking grammer whores.  

headhunt's picture

I hate when I do that - it is because they're communists (plural)

Playtime's Over's picture

Is this a real story?  They're red f@cckin China fer chrissake.  I hope they choke on all the harbor freight gargage backin up on the docks when we assume 3rd world status. 

directaction's picture

If you're going to call yourselves communists, you might as well act like communists, too. 

Spectre's picture

This is all so hilarious, hopefully it will cause a severe increase in their US Treasury disposals. The whole damn global Madoff scheme will finally implode by October 2015.

directaction's picture

I sure hope you're right. 

Chad_the_short_seller's picture
Chad_the_short_seller (not verified) Jul 22, 2015 5:48 PM

In other words, get long ASHR calls because the chinkies are going to do whatever it takes to get the stock market to new highs.

starman's picture

Well well well.

Hope Copy's picture

If the selling continues, PBoC will pay those that want out and are ready to flee with US treasuries and US Bonds..  I feel sorry for those that are going to get the Chicago Bonds although. 

The DEBT is coming home to roost.