Chinese stocks were weaker with another global slump, but there is speculation of market intervention by the Chinese government.
China 50: Daily Chart
The CH 50 dropped back through weekly support at 12,354, and that will be the line in the sand.
China’s US$1.35 trillion sovereign wealth fund was seen increasing its equity stakes in the nation’s four biggest banks, sparking speculation that authorities are trying to build confidence in the market after an exodus of foreign investment funds and a slump in the local currency.
Central Huijin Investment, which owns stakes in domestic financial institutions, added to its holdings in Industrial and Commercial Bank, Construction Bank, Bank of China, and the Agricultural Bank of China, according to stock exchange filings.
The purchases, worth around 477.5 million yuan (US$65.4 million), may also be showing that the government is ready to act with stimulus.
“This move, reminiscent of its actions during the 2015 Chinese equity market turmoil, signifies the government’s desire to maintain market stability,” Redmond Wong, at Saxo Capital Markets in Hong Kong, wrote.
The move could entice domestic investors to the market and also see the return of hedge funds from overseas who ran from the market over fears of the slow economic recovery in China and the tensions between the country and the US.
The wealth fund held equity stakes in 17 financial institutions, including banks, securities companies, and insurance companies, at the end of 2021, according to the most recent annual report.
US stocks ended a recent rally after inflation came in higher than expected. That happened only a day earlier, when investors were reassured by the FOMC minutes that the Federal Reserve was finished with rate hikes.
The minutes are trailing, while the inflation data was a reality check, and recent bullish activity in stocks, risk assets, and anti-US dollar currencies has unwound sharply.