Chinese Liquidity Dries Up: Stocks Hit 3-Month Lows, Tumble Most Since June 2016

It appears The National Team is taking a well-earned break as Chinese stocks extend their losses from late last week in the biggest 3-day drop since June 2016.

 

Breaking below a key technical support level...

Chinese shares were already on a shaky footing after last week when investor confidence was sapped by fresh government steps to reduce financial risks, and a rout in the bond market; but three straight days down with no aggressive "management" buying is unusual...

 

With the Shanghai Composite back to its lowest since August (when China"s National Team - aka state-backed investor China Securities Finance Corp - announced it had boosted its stake in the entire brokerage sector)...

 

At the same time, short-term liquidity markets are showing serious signs of strain as 1-month HKD HIBOR spikes to its highest since Dec 2008...

 

And South Korean stocks plunged most in 3 months...as tech shares slumped following an analyst’s report suggesting the memory chip “super cycle” would soon fade, led lower by Samsung Electronics.

 

Something has changed!

Chinese Stocks Are Plunging

Despite a liquidity injection and the rest of the world in "risk-on" mode over the French election results, Chinese markets are tumbling...

On Friday, we asked "Is China Trying To (Slowly) Burst Another Stock Market Bubble?" as Chinese monetray conditions were tightening dramatically...

And, as Bloomberg reports, it seems the catalyst is further crackdowns on shadow-banking.

China’s banking regulator, which said late Friday it will focus on guarding against financial risks, has ordered local units to assess cross-guaranteed loans, according to a Caixin report.

Having gone 86 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992...

It seems they might be... (or The National Team is going to have to work very hard today)...

As Shanghai Composite breaks below ist 200-day moving-average withe the biggest intraday drop since Dec 12th...

CHINEXT (China"s Nasdaq) is also getting hammered - testing its lowest levels since February 2015....