China has spent US$147 bil­lion to prop up stocks: Gold­man

The China Post - - LIFE GUIDE POST -

U. S. in­vest­ment bank Gold­man Sachs has es­ti­mated the main­land Chi­nese gov­ern­ment has spent up to 900 bil­lion yuan (US$147 bil­lion) in the last two months to try to prop up stock prices and halt a mar­ket rout.

Af­ter the Shang­hai mar­ket peaked in mid-June and then fell 30 per­cent in three weeks, the gov­ern­ment in­ter­vened with a res­cue pack­age that in­cluded fund­ing the state-backed China Se­cu­ri­ties Fi­nance Corp. (CSF) to buy stock.

Gold­man said the gov­ern­ment spent 860-900 bil­lion yuan to sup­port the stock mar­ket in June and July, ac- cord­ing to a re­search re­port is­sued Wed­nes­day.

The re­port put the to­tal war chest of po­ten­tial funds avail­able for mar­ket sup­port at around 2.0 tril­lion yuan — in­clud­ing funds al­ready spent.

Bloomberg News on Thurs­day re­ported that the CSF — pre­vi­ously a largely un­known in­sti­tu­tion that helped pro­vide fi­nanc­ing to bro­ker­ages — was seek­ing an ad­di­tional 2.0 tril­lion yuan, which would bring its to­tal mar­ket sup­port funds to 5.0 tril­lion yuan.

Wor­ries the gov­ern­ment is pre­par­ing to exit the mar­ket, de­spite re­peated de­nials, were the trig­ger for the big­gest one-day fall in eight years of 8.48 per­cent last month.

But Gold­man said fears of an im­mi­nent exit by the “na­tional team” — as the media and mar­ket reg­u­la­tor have dubbed the play­ers sup­port­ing the mar­ket on be­half of the gov­ern­ment — are over­done.

“The prob­a­bil­ity of a rash exit is low as the mar­ket has not yet sta­bi­lized and the gov­ern­ment has no press­ing need for the funds,” the re­port said.

It forecast the bench­mark Shang­hai in­dex would trade in a range from the mid-3,000 point level but would be capped at 4,500 points.

On Thurs­day, the Shang­hai Com­pos­ite In­dex closed down 0.89 per­cent at 3,661.54 points. It is now down around 29 per­cent since its peak clos­ing on June 12 — nearly the level that sparked the ini­tial gov­ern­ment in­ter­ven­tion.

Other an­a­lysts have said they ex­pect the mar­ket to test sup­port at 3,500 points and pos­si­bly at the 3,200 level in volatile trad­ing.

Gold­man said the gov­ern­ment has picked up heavy­weight blue- chip stocks in sec­tors such as bank­ing, in­sur­ance, food and bev­er­age, and healthcare.

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