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A New “Anomaly” Emerges In Chinese Markets

Courtesy of ZeroHedge. View original post here.

The Shanghai Composite Index, notorious for its wild swings over the past two years, has gone 85 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992.

The last 4 days have highlighted the unusual effect in Chinese stocks.. each time the Shanghai Composite dropped over 1% (red dotted line) it was miraculously lifted to ensure it closed with a loss less than 1%…

As Bloomberg reports, authorities favor a steady stock market because it helps companies fund investment and repay debt by issuing new shares, which could help boost economic growth, according to Yin Ming, a vice president at Baptized Capital in Shanghai.

“The national team is behind it,” Yin said. “State funds will likely continue to be a market stabilizer.”

For some investors, it’s a sign that state-directed funds are putting a floor under daily market swings – a development that presents short-term buying opportunities when the Shanghai Composite dips more than 1%  during intraday trading – but when this happens in the US its completely normal and defended as animal spirits that mean “stocks just want to go higher.”


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