You wouldn’t know it from looking at where things closed, but it was yet another wild session for the Shanghai Composite.
Over the past week, Chinese authorities have embarked on a concerted effort to calm domestic equity markets with promises of support for private enterprise and guarantees designed to help stop rolling margin calls in pledged-stock transactions that many feared were contributing to outsized losses.
Following the best day since 2016 on Monday, Chinese shares plunged with regional counterparts on Tuesday as broad-based risk-off sentiment swept across global markets amid gale-force geopolitical headwinds and late cycle concerns in the U.S.
On Wednesday, the SHCOMP rose 0.3% on the day, but the intraday swing was characteristically dramatic, as shares oscillated between losses of 0.7% and gains of more than 1.7%.
Volatility on the mainland spiked this month as turbulence in global equity markets and lackluster Chinese economic data battle with policymaker efforts to contain losses. Intraday swings in excess of 1.5% are now seemingly the norm.
Historical volatility is now well above levels seen during the February rout.
If you’re keeping score, by that simple measure, China is now the world’s most volatile major market. Hilariously, the the SHCOMP is now more volatile than Turkish bank stocks.
In any event, it’s hard to see how China’s mainland markets will calm down in the near future without overt intervention from the National Team.
Speaking of the National Team, Goldman estimates they collectively (remember, we’re talking about a collective here – the plunge protection team is indeed a “team”) bought ~110 billion yuan worth of shares in the second quarter.
“Our proxies suggest the ‘National Team’ may be supporting the market, at least during the latest sell-off, although the size of intervention may not be as significant as it was during the 2015 market meltdown”, the bank writes, in a note dated Tuesday.
That said, Goldman doesn’t see an argument for the type of large-scale buying that we saw during the 2015 rout.
“We see [the] case for large-scaled government intervention this time around as premature, given our assessment that the latest correction is less systemic in nature”, the bank says.
So jawboning it is – that, and an around-the-clock effort to ensure the pledged-stock plague doesn’t cause a calamity.