FXStreet (Barcelona) – The Brown Brothers Harriman Team highlights the key weekend developments in the Chinese markets, and further warns of a potential crisis ahead in the nation.
Key Quotes
“(1) officials suspended IPOs,
(2) 25 mutual fund companies declared they would “actively” buy stocks and hold for a year,
(3) 21 brokerage firms pledged to invest 15% of assets into the markets,
(4) China’s sovereign wealth fund will also join in buying,
(5) corporates are being encouraged to buy back their own shares,
(6) regulators may make it harder to short shares, and
(7) the PBOC will increase liquidity provisions, including an RMB100 bln increase in capital to China Securities Finance Corp., which manages margin trading.”
“Here, we provide some thoughts on just what the Chinese policymakers are trying to accomplish. Bluntly speaking, we think it is a mistake for China to attempt to target the equity markets. It is already targeting growth and inflation, as well as the exchange rate (though that is perhaps open to discussion going forward), all whilst trying to liberalize the economy and opening up the capital account. By adding an equity market target to an already impossible trinity, policymakers simply are juggling too many balls. We think risks of a crisis are building.”
(Market News Provided by FXstreet)