Forced Buy-Ins Spark "Liquidity Crisis" In China's 'Nasdaq'

Marking the worst year since 2008, China's tech-heavy (Nasdaq-equivalent) Shenzhen Composite index is down a shocking 35% year-to-date, and it's starting to become a self-feeding vicious circle...

As Bloomberg reports, the most recent slump in the teach-heavy index comes despite regulators' efforts to rein in risks of share-backed loans following reports over the weekend that insurers are being 'encouraged' to invest in listed companies to reduce liquidity risks connected to such loans.

Share pledges, where company founders and other major investors put up stock as collateral, have emerged as a pressure point in China’s debt-laden economy, especially as the stock market tumbles.

There’s a liquidity crisis in the stock market, and pledged shares are again starting to sound the alarm,” said Yang Hai, analyst at Kaiyuan Securities Co.

"Stocks in Shenzhen typically bear the brunt of loss of confidence in the stock market because of their higher valuations.”

Bloomberg additionally notes that this attempt to slow the impact of this crisis has been ongoing all summer...

China in June told brokerages to seek approval before selling large chunks of stock that have been pledged as collateral for loans, according to people familiar with the matter...

while the top financial regulator in August warned the industry that it’s closely watching corporate stock pledges.

And quite clearly, has failed... with two-thirds of Shenzhen Composite stocks now at 52-week lows or worse...

And it appears investors are screaming for The National Team to step in and rescue them (just like in the housing market)...

“If there are no real policies to cure the array of problems and ailments in our market, no one will be willing to take the risk,” said Hai.

“Authorities keep saying that there is room for more polices, but where are they?

Shock, horror! What are we to do in a 'free-market'?