The National Team Buys Low

Key News

Asian equities had a strong day as Japan, South Korea, and Hong Kong outperformed, while India and Thailand were rare underperformers.

We have previously stated that the Shanghai Composite’s level of 3,100 and the Shenzhen Composite level of 1,900 were lines in the sand for Chinese policymakers. Jawboning of the market higher, stimulus measures were announced in August when these levels were breached, with repeated measures having been rolled out since then. Today, we saw Central Huijin Investment Ltd., an arm of China’s sovereign wealth fund, a member of the proverbial “National Team”, increase its stakes in four Mainland listed Chinese banks: the Bank of China, which gained +3.18%, the Agricultural Bank of China, which gained +0.55%, ICBC, which gained +2.54%, and China Construction Bank, which gained +2.68%. As we’ve stated before, the Chinese government is telling you to buy stocks. Today, they put their money where their mouth is. Yes, it was only $68 million, though they stated their positions would be increased over the next six months. Central Huijin last publicly bought stocks in August 2015 after the Mainland’s margin debt-driven bubble burst. Their entry point was a short-term low, though it took time for all those margin positions to be unwound. Still, their entry point was profitable.