In what can only be described as total and utter desperation, China's Public Security Ministry and China Securities Regulatory Commission are discussing a plan to take action against "hostile short sellers"... (via Google Translate)
[ 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 .
Which in English means...
Special workforce to be led by Vice Public Security Minister who vows to soon nail down those who manipulate Chinese stocks, index futures
— George Chen (@george_chen) July 9, 2015 [5]
However, it appears thety are going to need to do more...
[6]
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Just one question: Will the police also arrest the brokers who allowed their clients to lever up to extremes with no awareness of risk, encouraged by the government, buying the stocks of companies that make plastic umbrellas at x-thousand P/E multiples?
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I didn't sell. I swear I didn't!!!! pic.twitter.com/jEi0hYrUkm [7]
— Fed Porn (@FedPorn) July 9, 2015 [8]
"I shorted" pic.twitter.com/Q3FzGh7gVC [9]
— zerohedge (@zerohedge) July 9, 2015 [10]
As we detailed earlier, China is a $hitshow again...
With more than half of Chinese stocks halted or suspended, traders are scrambling to hedge the potential vacuum under prices when (or if) they ever open again. With options limited to non-existent in China, ETFs around the world are under pressure (with significant discounts to NAV everywhere). The cost of protecting against significant downside is now at its highest on record and the skew (difference between optimists and pessimists) has never been higher... This 'protection' has seemingly relieved some of the vicious cycle selling as yet another round of financing to backfill liquidity holes in broker balance sheets, but Chinese stock futures are trading 2-3% lower in the pre-open (less than might be expected as much driven by margin hike forced unwinds as much as sentiment).
- *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 2.9% TO 3,363
- *CHINA'S SHANGHAI COMPOSITE INDEX SET TO OPEN 2.1% LOWER
[11]
Pushing CSI-300 Index into the red for 2015...
[12]
BREAKING: China's stock market opens over 2% lower, with over 400 stocks immediately down 10% ... and about 1400 stocks still in suspension
— George Chen (@george_chen) July 9, 2015 [13]
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But have no fear...
Another day, another round of liquidity poured into the leverage black hole...
- *CHINA SEC. FINANCE AIMS TO OFFER LIQUIDITY TO FUND COS.: CSRC
- *PBOC TO INJECT 35B YUAN WITH 7-DAY REVERSE REPOS: TRADER
And the politburo is getting serious!!
- *CHINA CBRC SUPPORTS BANKS TO COOPERATION WITH CHINA SEC FIN
- *CBRC ENCOURAGES BANKS TO COOPERATE WITH CHINA SEC. FINANCE
- *CBRC ENCOURAGES BANKS TO OFFER FINANCING TO CHINA SEC. FINANCE
- *CHINA CBRC TO SUPPORT STABLE STOCK MARKET DEVELOPMENT
- *CBRC ENCOURAGES BANKS TO ADJUST LOANS TERMS WITH STK COLLATERAL
- *CHINA CBRC ENCOURAGES BANKS TO HELP FINANCE STK REPURCHASES
Next come the orders on pain of death!!??
And then there's this...
- *HAITONG SECURITIES SLUMPS 16.6% IN H.K. AFTER SHR BUYBACK PLAN
That's not what is supposed to happen!!!
But traders have been extremely active in their hedging...
Crash risk has never been more expensive...
[14]
While At-the-Money Vol has spiked to 4-year highs...
[15]
Overnight saw Flash Crash come to China...
[16]
Selling pressure is heavy on the ETFs with all major China ETFs trading well below their NAV (ASHR 4.6% below!!)
[17]
And if you thought it was time to BTFD... consider this...
[18]
Chinese stocks are still extremely rich relative to the rest of the world.
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We have one simple question.
How do say "unleash the Bullard" in Chinese?
Charts: Bloomberg