Beijing may move beyond politics and take up futures trading

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China’s government has rolled out unprecedented measures in recent weeks in order to stymie the slide in the nation’s once-hot stock market. Now they may be about to, or already are, implementing further measures to underpin the market — buying stock market futures.

Reuters report there were more than 30,000 long futures contracts opened at CITIC Futures last week, countering bearish market bets worth over 40 billion yuan ($AU6.44 billion), according to an unnamed brokerage official. The source says the money seemed to be coming from state-backed investors.

If correct it would mark an escalation in Beijing’s attempts to support the nation’s stock market.

Up until this point their influence, through intermediaries such as brokerage firms and state-backed asset managers, was isolated in directly purchasing stocks — both small and large-caps — rather than financial futures.

While it’s uncertain whether this is actually the case, there has been no official announcement made by either the nation’s stock market regulator or China’s financial futures exchange, given recent attempts to underpin the market, including involving the police to investigate the malicious short-selling of stock market futures, it would hardly be surprising if the rumours turn out to be true.

Regardless, something has certainly perked up China’s stock market today. Having been down as much as 2.78% earlier in the session the CSI 300 index, comprising the 300-largest listed firms in Shanghai and Shenzhen, closed the morning session up 1.34%. The futures positions opened last week are a direct derivative of the index.

From this year’s high of 5379.5 on June 9 the index has fallen 25%. Over the past 12 months it is still up 84%.

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