Now It's Serious: PBoC Forced to Comment on Shanghai Comp Breaking 3000, 25-Year Support Busted

Major multi-decade trendlines are failing across markets.

iFeng: 央行回应金融市场波动：主要受投资者预期和情绪影响

We have noticed some fluctuations in the financial market recently, which are mainly affected by investors' expectations and sentiments. At present, our country's economic fundamentals are sound, the potential for endogenous economic growth is huge, and substantial progress has been made in preventing and defusing financial risks. The financial system implements the decisions and arrangements of the CPC Central Committee and the State Council, coordinates epidemic prevention and control and economic and social development, supports logistics smoothness and promotes the stability of industrial and supply chains, and minimizes the impact of the epidemic on economic and social development. In accordance with the principles of marketization, rule of law, and internationalization, steadily advance and complete the rectification work of large platform companies as soon as possible, and promote the healthy development of the platform economy. The People's Bank of China will increase support for the real economy with a prudent monetary policy, especially to support industries severely affected by the epidemic, small, medium and micro enterprises, and individual industrial and commercial households, support agricultural production and energy supply and increase supply, and launch technological innovation and re-lending and inclusive benefits. Special re-loans for the elderly, an increase of 100 billion yuan in re-loans to support the development and use of coal and enhancement of energy storage, increased re-loans to support agriculture and small businesses and special re-loans for civil aviation, maintain a reasonable and sufficient liquidity, promote the healthy and stable development of the financial market, and create a good currency financial environment.

Boilerplate. The point isn't what they said, it's that they said anything at all.

Elsewhere, the familiar "don't worry, please keep buying" message for the holders along with "where's the bottom?" for the nervous bulls.

iFeng: 李大霄：跌破3000点不是世界末日 恒指率先见底的希望最大

On April 25, the three major A-share stock indexes opened lower and moved lower. In the afternoon, the Shanghai Index fell below 3,000 points intraday. After 21 months, it returned to the "2" stock index and the ChiNext index fell by more than 3% intraday.

In this regard, Li Daxiao said that falling below 3,000 points is not the end of the world. When the market is rising, there will also be periods of adjustment.

He believes that policies to stabilize growth are being introduced one after another, and the market reaction will be reflected later. Therefore, we should not be overly pessimistic about the market, do a good job of responding, change from offense to defense, choose equity products that match our risk tolerance, and calmly respond to market fluctuations. At the same time, don't lose faith in good stocks, avoid stocks with high valuations, and be careful with leverage.

Li Daxiao said that the Hang Seng Index is currently the most hopeful for the market to bottom out, and the second is the Shanghai Stock Exchange 50. When conditions are ripe in the future, A-shares may rebound with good stocks as the main force. With the stabilization of the economy and the intensification of steady growth, stocks related to steady growth will return to their proper value.

Li Daxiao is like the Jim Cramer of China:

Li Daxiao’s share tips attract hundreds of thousands of views within hours of appearing on Chinese social media. The celebrity stock guru, who posts short, quirky online videos, is known to move markets when China’s army of retail investors follow his advice.

But Mr Li’s unshakeably optimistic outlook on Chinese equities has prompted scrutiny from authorities and a public backlash following the market rout caused by the coronavirus outbreak, with some investors blaming the star stock picker for their losses.

In one particularly ill-timed call, Mr Li in mid-February insisted the Chinese market was on the brink of a bull run, just days before stocks plummeted. Last year, his forecast that the Shanghai Composite index would hold above 3,000 points was repeatedly proved wrong as the US-China trade war whipsawed the market.

iFeng: A股跌破3000点何时触底？孙建波：高估值压力已基本解除 长期建仓机会显现

n April 25, the three major A-share stock indexes opened lower and moved lower, and the Shanghai index fell below 3,000 points, the lowest since July 2020. As of press time, the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index all fell by more than 3%, and more than 4,400 stocks fell.

Regarding the sharp drop in A-shares today, Sun Jianbo, chief economist of China Reading Capital, told Phoenix.com Finance that on the one hand, since the fourth quarter of 2021, the valuation of track stocks and high-valued white horses has been challenged. This challenge requires individual stocks to return to normal valuations.

On the other hand, Sun Jianbo believes that when the market falls below 3,000 points, the pressure of high valuation has basically been relieved, but for the market outlook, Sun Jianbo believes that it may further decline, and the reason is the decline. Panic inertia superimposes the current confusing economic environment.

As for where the "bottom" is, Sun Jianbo predicts that it may continue to drop to around 2700, and then there is a high probability that it will stop falling and stabilize. At the same time, Sun Jianbo pointed out that panic declines are often opportunities for long-term positions. He suggested that you should look for industries and companies with better growth in the next 3-5 years, and "build positions at lower prices during a panic decline.

Coronavirus is a big distraction for the world. The virus is real, but the overreaction allowed for a 2-year life extension on a bull market headed for the end. It is also now covering up weakness in China. As I've put it before, losing all the gains since March 2020 only gets the bear market to the starting line. All the damage from inflation and supply chains will make the ensuing bear market and recession far worse than it would have been otherwise. China is in the same boat as everyone else, and in worse shape with a currency that needs propping with falling reserves. 

It's possible China has already blown through some of those reserves with tricks if they believed the U.S. dollar bull market wouldn't last, in which case the depreciation will pick up steam. USDCNY has erased more than a year of losses in one trading week. It's taking a breather today after hitting a resistance area, but that's still a great bullish setup.