China starts to show signs it's wising up to how markets work
If we're looking for clues that the panic is over in China then it's stories like the one from Eamonn that we need to be seeing;
Caixin: CSRC scraps its focus on rescuing stock market
Trying to prop up a stock market is a fool's errand and is nothing less than a free lunch for market players. You may get some success if stocks are sold on flows while the underlying economy is doing well but when they're being sold on growth worries you're trying to prop up a house of cards in a hurricane
China may have just got a big slap round the face from the market in it's efforts to intervene in prices. A market can smell weakness and it usually will take the weak to the cleaners. The best way to calm a market, like what's happening in Chinese stocks, is to leave it alone and let the market work its issues out. If money wants to flow out on growth weakness then let it. That's the natural order of things. India's CB head Rajan said it best today when he said that the market should "Deal with it and stop crying for support"
The CSRC news in no way says that the Chinese have thrown in the towel entirely and I'd be surprised if they did. Losing to the market would be a case of eating humble pie and that mind set doesn't figure among the Chinese powers that be. If they do stop intervening they'll be quiet about it and it will shift to talk but no action
I wrote yesterday that as the markets response to a lack of intervention will wane. Chinese stocks in Shanghai were down a hefty chunk today but it's different news elsewhere. I don't for any reason suggest that the selling is over as we're still dealing with the fundamental picture in China. What I do suggest is that the panic is probably over.
At the end of the day whatever happens to the Chinese economy will happen. It shouldn't be a surprise that they'll see weaker growth given the weak growth across the world. It shouldn't be a surprise that we see the market react to that by 'selling China'. China may be an old country but it's still relatively young as far as markets go and we're seeing some of that immaturity. Maybe China has just had its 'Don't touch the oven because it's hot' moment. We'll see if it's learnt the lesson.
Even if the panic is over, markets will remain volatile as we've still got plenty of big events on the horizon around the globe. We'll still need some time for markets to settle so I won't be seeing today's stock moves so far as anything other than a bounce after a big fall. As I also noted yesterday, let the price action do the talking, don't guess where prices will go. What's likely to happen is we get sizeable moves both up and down for a few days. Picture it like a stone that's dropped from height into water. We get a big splash and then the subsequent waves lessen in size
China news is far from over but maybe they'll wake up and realise that markets will act as they always have and that the 'old' ways of dealing with it are better than the new ways
Sometimes the old way is the best way