When there’s no other investor to turn the market around other than the government, which nine times out of ten compounds the problem, you know it’s done.
China has spent $144 billion (€132bn) to bolster the country’s fragile stock market since June, Goldman Sachs has estimated, but still has more than that amount in reserve to deploy if stocks resume their sharp descent.
The coalition of state financial institutions – the “national team” – has a war chest of roughly $322 billion at its disposal to support the market, the bank believes.
Concern that the national team is short of capital or is preparing to exit its investments has dominated investor sentiment in recent weeks. Shares fell 10 per cent last week after local media cited anonymous sources saying the national team was preparing its exit plan.
“The episode has underlined the difficulty the government faces in the task it has set itself of convincing investors that equity markets will deliver sustained gains,” said Chang Liu at Capital Economics. “The market is driven more than ever by speculation about official intentions and any positive momentum will raise questions about whether support will be withdrawn.”
Full article: China pays $144bn to bolster stock market (The Irish Times)