It hasn’t been a good start to the week for Chinese stocks, nor a good three months. They’ve been absolutely hammered, losing more than 40% since June 12. The losses just keep on coming, despite the best efforts of the government to stem the losses.
While some draconian measures have been used in an attempt to reverse the recent trend – including the arrest of those who “maliciously” short sell stocks – direct stock purchases through the government’s so-called “national team” have been widely credited for helping to prevent even greater market losses.
The “national team” is the collective name given to state-backed and state-directed Chinese financial firms who have been ordered to directly buy stocks in an attempt to boost investor sentiment. As the name suggests, these firms work in tandem – unsuccessfully so far – to push share prices higher.
So just how much money has the “national team” put towards stocks over the past three months? According to Bloomberg, citing research from Goldman Sachs, it’s a near-unbelievable 1.5 trillion yuan, or $US236 billion.
For some perspective, the market cap of Amazon is around $US236 billion.
In August alone, the bank believes the government bought 600 billion yuan worth of stocks, taking its total holdings to around 9.2% of China’s free-float market capitalisation.
Big money, and likely big paper losses, given stocks have plummeted over 40% since June 12.
Today the benchmark Shanghai Composite has fallen by a further 1.44%, extending its losses since hitting a multi-year peak on June 12 to 41.33%. Large cap stocks – a noted favourite of the “national team” – are lower by a similar margin.
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