China Equities Recoup Earlier Losses On State Buying Headlines

Volatility in China equities is expected to continue for the moment as Government policy makers continue to announce new measures to calm the market. RTRS sources report late yesterday that "Chinese brokerages, including state-owned behemoth CICC, have restricted the amount of cross-border swap transactions domestic investors can undertake, as authorities seek to defend the weak stock market."

• As the Asian trading session gets underway, markets opened lower, however we are now rebounding. In Hong Kong the HSI is opening higher, up 1.3%, while the Tech index is higher by 1.80% and mainland property index trades 1.05% higher. China Mainland indices opened lower today, however have seen a strong reversal after China sovereign funds vows to further increase ETF holdings, the CSI 300 is 1% higher, while the ChiNext index is 3.00% higher after being down 1.30% on the open, CSI 1000 also reversed the morning move lower to trade 2.30% higher
• Regulatory shifts seem to be having some effect on the market. However, distortions remain evident in pricing, as dual listed stocks are trading more expensive in Mainland China than they are in Hong Kong, at levels not seen since 2009.
• While the polices also seem to be supporting larger cap names over smaller cap companies, as investors view that new policy won't go far enough to support smaller cap names. In trading yesterday the small cap index CSI 1000 was particularly hard hit, lower by 8.5% at one stage to eventually close 6% lower for the day, as investors looked to unwind structured products and margin calls in the small cap space, while the large cap index CSI 300 was lower at 2% at it's worst to then close 0.65% higher. Inflows into large cap ETFs has also surged in recent weeks.