There is market support practiced by most countries financial authorities, usually with things such as circuit breakers, etc... but what the Chinese authorities have been doing is tantamount to meddling, acts of desperation, runs afoul of free market principles or proper capitalism.
Here are the things China has done for the past 10 days to stop the sell down:
1) drop interest rat
es by 75 basis points
2) ban IPOs
3) ask state own firms not to sell shares
4) ask securities firms to buy shares (this one is so puzzling)
5) allow companies who wish to suspend their own shares, for basically any reason ... now its close to 50% of all listed companies in China having requested and being suspended from trading
6) restricted short bets on index futures
as if thats not enough, today they announce that anyone holding at least 5% shares in any listed company CANNOT sell their shares for 6 months.
BUT ... wait for it ... this one takes the cake ..."Under new rules announced last week by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker." To allow punters to literally bet the house on it ... soon securities firms will be the biggest house owners!!!
The ChinaSecurities Regulatory Commission has done more than what is deem proper in order to prop up the market. But markets are in panic mode and is fuelled mainly by passions and not rational thinking. Two things guide markets trend, FEAR & GREED. There is now too much panic and fear, and every additional step taken by CSRC are being viewed of acts of desperation and add fuel to fear.
The cascading effects of China's correction lies not with just punters betting on the markets but rather companies themselves using their shares as collateral for margin lines to play the market themselves. Much of the funds has gone to manipulate, support or push their own share prices higher, and/or bet on other companies. The cascading effect is due to margin facilities being cut, stop or collateral being sold down.
However when you can willy nilly suspend your counter to evade a sell down, the selling can only build up, not abate.
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