When the Chinese stock market plunged last month, Asia Unhedged said the liquidity that had been drained out of the market would return in July. We also said that the Chinese stock market’s benchmark index would soon be trading above 4,000 again.

It may have taken a few days longer than we anticipated, but it looks like liquidity has returned. Liquidity is so strong that the China Securities Finance Corp, the state-backed institution that provides margin financing and liquidity to the market, has delayed its plan to raise 100 billion yuan via short-term bills, four sources familiar with the matter told Reuters.

That may be because the market is getting stronger. The Shanghai Stock Exchange Composite Index rose 0.6% to 4,018 on Tuesday, while the Shenzhen Stock Exchange Composite Index jumped 1.6% to 2,265. The ChiNext Price Index, which tracks small stocks, gained 1.2% to 2,882 and Hong Kong’s Hang Seng Index added 0.5% to 25,536.

The original plan by the CSFC was to issue 100 billion yuan of three-month bills yielding 4.4% last week, mainly via China Merchants Bank. Then the CSFC was told to delay the issuance, said the sources. They did not provide specific reasons for the delay. Neither the China Securities Regulatory Commission nor the China Securities Finance Corp gave Reuters a comment on the story.

With Chinese stocks advancing for the fourth consecutive day on Tuesday, it appears that the government’s earlier move to stabilize the market by having the CSFC issue 80 billion yuan via short-term bill sales was enough.

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