It looks like all that talk about government agencies wanting more money to buy more shares on the stock market is having its intended effect.
Chinese equities rose Friday on the heels of reports that China Securities Finance wanted 2 trillion yuan more than the 3 trillion yuan the government had already given it. On Thursday, Bloomberg quoted unnamed sources saying CSF wants the additional money to provide liquidity to brokers to encourage them to buy stocks and mutual funds.
The Shanghai Stock Exchange Composite Index gained 2.3% to 3,744, giving it its best week since July 24, with a 2.2% advance. The Shenzhen Stock Exchange Composite Index rose 3% to 2,177. And the CSI 300 Index of the 300 largest A-shares, advanced 2% to 3,907, for a weekly rise of 2.4%, its best weekly performance since July 10.
In an effort to encourage that buying, the Shanghai Securities News said Friday that more than 1 trillion yuan ($161 billion) of cash was sitting in about 300 China funds, and that it was ready to come into the market, according to Reuters.
Goldman Sachs analysts estimate that the “national team” has potentially spent 860-900 billion yuan to support the stock market in June-July and the potential aggregate size of market-support funds is probably around 2 trillion yuan, reported Reuters.
It goes without saying that Asia Unhedged is still bullish on China. Chinese regulators did a terrible job of controlling leverage and coordinating monetary and export policies ahead of the stock rout. Despite this, the economy is still chugging along. China needs to unpeg the yuan from the dollar and realize that an appreciating Chinese currency inevitably leads to declining export growth. Some lessons take time to sink in. Asia Unhedged believes China’s monetary honchos will eventually get their ducks in a row.