China Just Started Nationalizing Its Stock Market

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.