News headline story
By Shuli Ren
According to Bank of America Merrill Lynch, the Chinese government spent at least 1.5 trillion yuan ($234 billion) in the third-quarter alone, buying shares in at least 1,365 stocks – or 49% of the total number of listed shares – to shore up its stock markets. It has since covered most of its losses.
Merrill derived these numbers based on top-10 shareholder information disclosed by companies. It looked at holdings by China Securities Financial Corp. (the official bailout fund), domestic sovereign fund Huijin, the broker-funded Stabilization Fund, as well as the five mutual funds funded by the securities regulator CSFC. Merrill also included in its estimates the 120 billion yuan ETF bought by the CSFC – this number is based on local media reports.
Beijing seems to have recuperated most of its losses. While the government agencies have lost an estimated 224 billion yuan as of the end of September, by November 11, they collectively gathered 44 billion yuan in capital gains – or about 3% – according to strategist David Cui.
The Shanghai Composite Index dipped to a year-to-date low of 2965 at the end of August but was trading at 3563 recently.
To be sure, Merrill’s China bear Cui is not feeling bullish. “Given the potential damage to the PBoC’s and RMB’s reputation, economic growth and long-term financial system stability, we think it unlikely that the government has the resolve to keep buying if heavy selling pressure in the A-share market resumes at certain point,” wrote Cui. Last Friday after the market close, China’s two stock exchanges doubled their margin requirements to 100%. Beijing certainly does not want another multi-billion dollar bailout for liquidity-inspired bull run.
The Shanghai Composite Index pared back earlier losses, down only 0.5% by noon break. The ChiNext Index was up 0.8%.
Month-to-date, the iShares China Large-Cap ETF ( FXI) fell 3%, the iShares MSCI China ETF ( MCHI) fell 2.3%, the Deutsche X-Trackers Harvest CSI 300 China A-Shares Fund ( ASHR) gained 1.9%, the Market Vectors China ChiNext ETF ( CNXT) rose 3.5%.
More at Barron’s Asia Stocks to Watch blog, http://blogs.barrons.com/asiastocks/
(END) Dow Jones Newswires
November 15, 2015 23:43 ET (04:43 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
