Phisix Operation Team Viagra Log April 20, Sharp Losses of China’s Shanghai Index Possibly Eased by National Team Interventions

Well, there has been no let up when it comes to cosmetically sprucing up the Philippine headline index.

While today’s intraday price actions had mostly been less volatile, “marking the close” pump contributed to the erasure of a staggering 42% of the day’s loss which tallied at -.19%.(see below)

As been noted yesterday, the apparent task by the index has been to keep PSEi from falling below 7,200.

However, instead of bolstering the index via the broader market, they opted to play safe today.

So the use of two major issues from two key sectors. 

SMPH’s share price magically jumped by a stunning 1.6% at the last minute market intervention phase to close the day up by 1.82%. This means that a whopping 88% of SMPH’s gains had been due from "marking the close". So SMPH pushed the property index and the PSEi higher.

On the other hand, AC was down by a big 1.7% just right before the close. However, index managers pushed the said stock by .9% to reduce the day’s decline to just .8%! Or close to half of AC's deficit was expunged courtesy of the index manipulators. So AC contributed to the push in both the headline and the (holding) sector index

Almost daily price fixing of the index and the PSE: only in the Philippines!

Oh by the way, Chinese stocks tanked by 2.31% today. But the day’s loss had been mitigated by what I would suspect as interventions from the "national team".

Unlike the Philippines, at least the Chinese government admits to these interventions.

The Shanghai index dived by as much as 4.4%, post lunch, before its sudden surge to wipe out 47.5% of said deficit at the near close. The Google chart above accounted for the last five day intraday sessions of the Shanghai index. And the huge pump can be seen in the rightmost side of the chart.

As one would note, pumping occurs at almost each session close (see red boxes). 

The difference is that the Philippines version signifies a Viagra like response as price fixing occurs at the last minute or during the transition from regular market trading to market intervention phase, hence the "marking the close", this compares to the last quarter of each session push as seen in the Chinese version. The Chinese national team ought to import Philippine price fixers.

The role of the Chinese national team as indicated in today’s Bloomberg report: Signs of stabilization in the world’s second-largest economy and speculation of buying by state-backed funds helped send the Shanghai Composite up 12 percent since its low on Jan. 28. China reported the economy grew 6.7 percent in the first quarter, in line with estimates, while industrial output and retail sales in March beat expectations. China stepped up intervention in its financial markets after stocks extended last year’s $5 trillion selloff and the yuan fell to a five-year low.

Moreover, China’s central bank the PBoC via its agency State Administration of Foreign Exchange (SAFE) have been indirectly amassing stocks.

From the Nikkei Asia

Consider Wutongshu Investment Platform, which is wholly owned by the State Administration of Foreign Exchange. Since last year, the fund has acquired at least 30 billion yuan ($4.62 billion) worth of shares.

Wutongshu was established in November 2014, with 100 million yuan in capital. It is reportedly led by He Jianxiong, a former director-general of the international department at the People's Bank of China. Recently, the fund's name has cropped up on the rosters of major shareholders of at least 12 listed companies.

As of Friday, its holdings in Shanghai Pudong Development Bank were valued at around 11 billion yuan, while those in Industrial and Commercial Bank of China (ICBC) were worth about 6 billion yuan. The institutional investor also runs a pair of investment companies. It appears the strategy is to have the parent increase its weighting of bank stocks, while the two units are likely focusing on other industries.

It wasn’t stated whether SAFE’s Wutongshu Investment Platform directly intervened or intervened through intermediaries from which the company provided financing. So the Xi Jinping Put has been extended to use the PBoC's SAFE.

As for today’s weakness in Chinese stocks, the same Bloomberg report seem lost to explain today’s actions

Traders struggled to explain the reason behind the sudden selloff, which isn’t an unusual occurrence in a market dominated by individual investors. Interest in mainland equities has been fading this month after March’s 12 percent surge amid concern that improving economic data will prevent the government from adding stimulus. Wei Wei, an analyst at Huaxi Securities Co. in Shanghai, says the slump is triggering concern that the panic seen at the start of the year, when the equity gauge sank 23 percent in the space of a month, could return.

Perhaps the lifting of the ban last April 8 on large shareholder selling of more than 1% of the stake may have been a factor. The easing of selling restrictions allows large shareholders to sell up to 1% of the total in a three month period, according to the Nikkei Asia

The other factor could be from reports that China’s $ 3 trillion corporate bond may have started to unravel

From another Bloomberg report yesterday

Spooked by a fresh wave of defaults at state-owned enterprises, investors in China’s yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003.

While bond yields in China are still well below historical averages, a sustained increase in borrowing costs could threaten an economy that’s more reliant on cheap credit than ever before. The numbers suggest more pain ahead: Listed firms’ ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis…

China’s leaders face a difficult balancing act. On one hand, allowing troubled companies to default forces money managers to pay more attention to credit risk and accelerates government efforts to curb overcapacity. The danger, though, is that investor panic leads to tighter credit conditions, dealing a blow to President Xi Jinping’s plan to keep the economy growing by at least 6.5 percent over the next five years.

Economic figures for March reveal a growing dependence on debt. China’s aggregate financing -- a broad measure of credit that includes corporate bonds -- almost doubled from a year earlier to 2.34 trillion yuan, exceeding all 24 forecasts in a Bloomberg survey as policy makers turned on the taps to support economic growth.

If the latter (emergent signs of corporate bond strains) will be or serve as the cause that may be aggravated by the former (1% selling rule), will the Chinese national team be able to stop the tidal wave of selling?

And to extend the thought, will the local or Philippine counterpart be able to forestall a potential chain effect from the above?

Interesting

Note: Philippine data/images from Bloomberg, technistock, colfinancial, and the PSE