- Chinese financial markets are having another wild session on Tuesday.
- Both stocks and the Chinese yuan are off their earlier lows. The recovery was unusually abrupt.
- China’s “National Team” may be contributing to today’s moves.
It’s been another eventful session for Chinese markets, even by their volatile standards.
From the Chinese yuan to stocks, both are jumping around like a cat on a hot tin roof.
Here’s the scoreboard as at 2.30pm in Sydney.
Shanghai Composite 2,559.34 , 0.68%
SSE50 2,418.07 , 1.19%
Shenzhen Composite 1,270.83 , 0.50%
CSI300 3,105.02 , 0.91%
CSI500 4,169.95 , 0.18%
Hang Seng 24,861.82 , 0.12%
USD/CNY 6.9661 , 0.08%
USD/CNH 6.9721 , -0.04%
After the People’s Bank of China (PBOC) set the midpoint of USD/CNY at 6.9574, the highest level since May 2008, the USD/CNY climbed to 6.9711 before abruptly tumbling back to where it began the trading session.
As a reminder, a higher USD/CNY indicates a weaker yuan against the greenback.
The turnaround in the onshore-traded yuan was also replicated in the offshore-traded yuan, or CNH, which also abruptly strengthened after falling to fresh multi-year lows earlier in the session.
Some put the turnaround to reports that US President Donald Trump believes he will get a “great deal” with China on trade.
While that may have sparked the turnaround in the yuan, as seen in the tweet below from Simon Rabinovitch, Journalist at The Economist, China’s “National Team” (also known as the “Plunge Protection Team” in financial circles) may have also stepped in to prevent further declines as the both the CNY and CNH approached the key 7 level with the greenback.
"Fear not, the 'National Team' is still here": top headline today in Securities Times as China tries to reassure investors that the state will prop up stocks. https://t.co/7gf86iyhwo pic.twitter.com/kHygPxiYxZ
— Simon Rabinovitch (@S_Rabinovitch) October 30, 2018
The “national team” refers to government-backed entities that often step in to support Chinese markets if they’re not functioning as desired.
They’ve certainly been active in China’s stock market today with China’s Securities Regulatory Commission (CSRC) announcing that it will encourage share buybacks and M&A among listed Chinese firms, as well as pledging to guide long-term capital into the stock market.
On top of other recently announced measures such as cash liquidity injections and income tax cuts, the latest announcements have gone down well with investors — at least so far — with all mainland markets climbing off their earlier session lows.
The gains are being led by large-cap stocks with the SSE 50, Shanghai Composite and CSI 300 all up between 0.7% to 1.2%.
These indexes were the hardest hit by a late plunge in Chinese stocks on Monday.
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