We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men. - Orwell
This is a companion discussion topic for the original entry at http://theharshcouch.com/thc/2015-07-07/
The Harsh Couch - 2015.07.07 Gangsta in China
wibbly
#1
This is a companion discussion topic for the original entry at http://theharshcouch.com/thc/2015-07-07/
Restating the obvious is the only thing I’m good at. Finally, I get credit for it!
Last week, Greece got more attention - likely because it was less opaque, more understandable and explainable, and also rapidly approaching the joint cliff of default/referendum.
China’s woes are getting more attention this week. But coverage still suffers because the of the huge lack of visibility into the Chinese system and the lack of public accountability of China’s leadership.
Contra my comments on the show, it seems Taiwan is now getting much more interesting.
Timeline I cobbled together below.
See also http://www.zerohedge.com/news/2015-07-07/presenting-chinas-plunge-protection-playbook
Timeline: What have the regulators done to save the A-share market?
June 12th
CSRC allow brokers to roll over margin trading contracts with clients
CSRC loosen the bar for institutional investors to participate in margin trading
June 27th
PBoC cut the interest rate by 25bps, together with selective RRR cuts. It is unusual for the PBoC to move interest rate and RRR together
June 28th
CSRC sooth market by saying that “market correction is a natural adjustment to the over-accelerated rally”
June 29th
CSRC announced to punish major holders who “illegally” short. The investigation process has already begun
CSRC made a statement suggesting that a sharp correction is harmful for equity market development
CSRC urged investors to be rational on market and not believe in “shorting rumors”
CSRC soothed the market by saying that “margin risk is controlled”, “liquidity is ample” and “although price dropped, trading volume actually improved since June 12th”
CSRC announced that the amount of forced margin account liquidation is very limited.
MoF and MoHRSS jointly issued the public consultation version of “basic pension fund management rule”, stating that basic pension funds can invest up to 30% in equity market-related products
July 1st
CSRC cut trading fees by 30%
CSRC wiped out the rules of 1) debt repayment time limit of 6 months and 2) maintenance guarantee ratio of 130%.
Brokers can now make up their own rules
Brokers are allowed to finance with short term corporate debt
CSRC announces brokers are allowed to finance by securitizing the right to return of their margin products
If the client already has a margin account, he can keep trading even if this 20-day average total asset falls below 500K
July 2nd
CSRC vows to investigate market manipulation.
CSRC said that there is still room for margin growth
July 3rd
Some large brokers suspend new margin short business.
CSRC increases the cpaital of the China Securities Finance Corporation (CSFC) from RMB24bn to RMB100bn
China Financial Futures Exchange (CFFE) increases the cost of short selling and vows to investigate speculative short selling.
July 4th
21 Large securities brokers announce they will not sell their principal investments if the Shanghai composite stays below 45000 and they should increase their holdings
CSRC asks 21 brokers to invest no less than RMB120bn (or at least 15% of their net asset) in blue-chip A share ETF. Brokers jointly announces that they will do so
28 central SOEs announce to postpone their IPOs in support of the A share market, as ordered by the State Council.
July 5th
PBoC will inject liquidity to China Security Finance Corp to expand its business and stabilize the stock market (government buying stock)
China Central Huijin bought A share ETF and announces it will buy again soon
CSRC meeting agreed that IPOs and private placements >5bn Rmb will be postponed until market goes above 4500 points.
Management from 25 Chinese mutual funds announced that, to support market stability, they will accelerate the registration and issuance process of equity funds to buy stock funds and hold for at least 1 year. By 9 July, 95 mutual funds said they will do this.
July 6th
National Council for Social Security Fund said to disallow mutual funds to sell stocks in their social security portfolio (social security fund takes about 30% of the A share secondary market).
China Insurance Regulatory Commission orders insurance funds to maintain net buy of equity on a daily basis.
July 8th
Central Huijin Investment issues a statement, vowing to protect capital market stability
MoF issues statement, vowing to protect capital market stability
CSRC bans listed companies’ large shareholders (>5%), directors and senior management from selling own company’s stocks in the coming 6 months
SASAC issues statement to encourage SOEs to conduct share buy backs. All central SOEs promised to not sell, increase buy of stocks and increase their SOEs
PBoC announces it will provide sufficient liquidity support to the CSFC through repos, collateral financing, relending and other measures
CSFR issues RMB280bn crdit line to 21 large brokrers for the purpose of increasing principal equity holdings
PBoC injected ~500bn Rmb into China Securities Financial Corp (CSFC), which will provide 250bn credit quota for 21 brokers to buy stocks.
The CSFC will also invest 200bn Rmb in 5 mutual funds, increase its purchase of mid and small cap stocks
CSRC is talking to major stock sellers. If they sold under 500mm, they need to buy back 10% of the value they sold. If they sold over 500mm, they need to buy back 20% the value they sold
July 9th
SFC finished its 80bn short term backed by PBoC
CSRC ordered all listed companies to do at least one of the following: 1) major shareholder stock purchase 2) management stock purchase 3) share buyback 4) giving equity incentive 5) employee stock ownership plan
The Ministry of Public Security is also involved in investigating and punishing “malicious” short selling. All violators will be fined.
China Insurance Regulatory Commission: insurance companies cannot force brokers to prepay for margin businesses.