The Other US-China ‘War’: Plunge Protectors Versus National Team
As tensions increase between China and US over trade, democracy/Hong Kong, Taiwan, Huawei, and diplomatic travel, there is another ‘struggle’ going on that is all about appearance.
Bloomberg opines that an unusual sense of tranquility has descended on China’s financial markets, especially notable amid the chaos of dueling headline-algos that a deal is close (or not).
Notably, Bloomberg raises the specter of China’s “National Team” – as state-backed funds are called – which is sometimes suspected of buying shares to ensure market stability around major events like legislative meetings or big anniversaries.
“I wouldn’t be surprised to see if the government asked banks or funds to not react to the news,” said Justin Tang, head of Asian research at United First Partners, who added that he does not see direct intervention as in the past.
“The government could be a quiet hand of the market in China.”
However, one thing Bloomberg does not dare to mention is the US Plunge Protection Team appears to be have been just as active…
Since the “Phase One Complete” headlines, China has slid notably while US markets have risen almost incessantly (and far too linearly)…
Additionally, while Bloomberg notes the relative calm of China’s markets, it has relatively exploded relatiove to the collapse in volatility in US markets…
We give the last word to Hao Hong, chief strategist at Bocom International:
“Does this lack of volatility feel normal? No!”
But do not for one second believe this is China only, given the charts above, it’s clear that someone or something is desperate to keep US markets aloft…
And don’t forget…
And so it is that both China and US are desperate to maintain the appearance of ‘strength’ – as indicated by their respective stock markets – as trade deal chatter reaches the vinegar strokes.
Thu, 12/05/2019 – 14:55