From the FT:
The Shanghai Composite Index gained 3.7 per cent, its best day since July 10, after dropping 10 per cent last week and another 1.1 per cent on Monday. A coalition of state-owned financial institutions — known collectively as the “national team” — have backstopped share prices in recent weeks after the Shanghai Composite fell 35 per cent from a seven-year high reached on June 12.
“The national team’s movements are like a chess game. They wait until prices fall sharply, then step in. They’re responding to the market’s ebbs and flows,” said Hu Guopeng, strategist at Fangzheng Securities in Shanghai.
The tech-heavy ChiNext Composite index, which tracks small-caps traded in Shenzhen, also rose 6 per cent on Tuesday after dropping 5.6 per cent on Monday. Mr. Hu noted that before Tuesday’s rally, the ChiNext was approaching levels that would trigger losses on equity-linked structured products, potentially sparking a damaging chain reaction.
“It looks like some timely intervention by the national team,” he said.
Harmony at work.
