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). However, market irregularities flare up. For instance, the Hang Seng Index was depressed by the disappointing price inflation data for most of yesterday, till the final hour of the afternoon session when mysterious buyers scooped up big Chinese banks and the “Two Oil Barrels” (a collective nickname for PetroChina and Sinopec among Chinese traders), with very large orders to push the index to close up by more than 200 points.
Meanwhile in the A-share market, PingAn and Industrial Banks plunged 4% within minutes under very large sell orders, before regulators started to investigate the validity of these trades. But last minute buying was also seen in other index heavy-weights such as the “Two Oil Barrels” in A-shares, just as the Shanghai Composite was falling yesterday. The trades based on the XiongAn New Zone indeed started to see very large sell orders since April 11, towards the day’s end of trading session.
There are public discussions that the size of some orders coincided with the number of shares owned by some entities with state background. And this morning, a number of companies under the XiongAn theme that traded limit-up for a number of days consecutively issued notice of trading halt due to “irregularities in stock price”. (We believe that the construction of the new zone will take more than a decade, with cumulative fixed asset investment of around two trillion yuan. In an economy that at times invested about 60 trillion yuan in fixed asset, XiongAn will be a small but important part). Further, after industrial commodities’ plunge yesterday, commodity exchange lowered margin requirements for iron ore, coking coal and coke, three futures contracts that have been under severe selling pressure.
The attention from the “visible hand” is bewildering, and may be preventing stocks from pricing in the waning momentum in China’s economic rehabilitation. Recall that “directing and stabilizing expectations” was discussed as part of the mandates in this year’s “Government Work Report”. As the mainland’s stocks are still dominated by retail trades, and the prescience of Chinese stocks to forecast future economic events has endured for more than two decades, it is not difficult to understand how stocks can be maneuvered as an instrument to set public expectations.
Of course, the cost to such tactics is that stocks gradually stop reflecting the underlying fundamental, and volatility on either up or downside gradually subsides - till eventually few could profit from trading
. The drying liquidity in the offshore RMB market has already made it less relevant for traders.
