It looks like all hands are on deck at the PBoC as sources tell Caijing Magazine (Chinese) that China’s National Social Security Council has ordered all its portfolio managers to not sell any shares.
Interestingly, rumors that Central Huijin – one of the country’s multi-billion dollar sovereign funds – was under orders to prop up large cap stocks were also pretty prevalent earlier today.
If this is the case, it seems like Beijing’s getting a little desperate to recharge the Shanghai market, which makes sense given how the PBoC hasn’t telegraphed an all-out support plan for the index, though Bank of America Merrill Lynch notes that one shouldn’t rule that out yet:
“The A-share market may not bottom until the government, possibly via the PBoC, becomes the buyer of the last resort. It seems that the government might have just taken the first step in that direction on Sunday night with PBoC’s promise to provide liquidity support to stabilize the market… …(w)e assess that there is still a fairly high chance that market may fall sharply again at certain point over the next few months, unless the PBoC makes an open-ended commitment to support the market.”
“We suspect that the initial PBoC loans to CSFC will be used on Monday morning to fund the MSF until brokers’ funds arrive (by 11am on Monday as ordered by the CSRC). Local media reported that CSRC is confident of Rmb1 trillion inflows into the A-share market in short order. So it’s also possible that PBoC might have committed to provide a few hundreds of billions of Rmb for the time being by our assessment, with the balance of the inflows potentially coming from pension funds, insurers etc. At this stage, it doesn’t appear to us that PBoC is prepared to buy stocks itself or make its commitment to provide support open-ended. “
Let’s see how things go from here.
Photo credit: groucho via Flickr