How to Manipulate Stocks: Chinese Authorities Step in to Stop the Rout

For proper effect, the directives were purposefully leaked to the media.

The Shanghai Composite Index plunged 10.2% last week, the largest weekly drop in two years, and was down 11.4% since January 26. But it wasn’t just last week that things became unglued. The Shenzhen Composite Index had plunged 14% since January 24, only about half of it last week.

The Spring Festival holiday is coming up this week, and there were fears that traders want to unload additional positions ahead of it. There are other factors lined up against the stock market, including China’s off-and-on-again crackdown on leverage. So it was time for authorities to step in and set things right.

Over the weekend the China Securities Regulatory Commission (CSRC) and other regulators have sent directives to:

  • Major stockholders, telling them to acquire more shares of companies listed in mainland China in which they already own large stakes.
  • Mutual fund firms, telling them to curtail share sales to avoid becoming net sellers.
  • Brokerages, telling them to provide to the CSRC trading summaries from last week along with trading plans and previews for the current week.

For proper effect, so that all players in the market would know that the Chinese authorities are going to stop the selloff and turn it around, and thus to encourage more buying by other players, these directives were purposefully leaked to the media, including Bloomberg, which reported it this morning. This served as confirmation what everyone had been hoping for: That the authorities would not let the market fall prey to market forces.

The directives went out this weekend, but late last week there was already some heavy lifting going on behind the scenes that wasn’t properly leaked. Bloomberg counted over 110 companies listed in Shanghai and Shenzhen that had announced that their major shareholders had increased their stakes in them starting on Friday.

Bloomberg also reported that the Shanghai Stock Exchange had announced on Friday that it had issued warnings and limited intraday trading to prevent large sales that might affect market stability.

After all this had gotten out by Monday morning, it was now time to keep small investors from selling and to encourage them to buy more. The Shanghai Securities News reported on Monday, according to Bloomberg, that the China Securities Investment Services Center, which serves smaller investors, said that major shareholders can boost investor confidence by purchasing stocks.

Authorities are once again yanking on the levers to keep the market from backsliding into some sort of price discovery. And it worked. The markets in China were up on Monday, with the Shanghai Composite rising 0.8% and the Shenzhen Composite surging 2.6%, which set the tone in Asia. All major Asian markets showed gains, except in Japan where markets were closed due to the National Founding Day, one of the 16 market holidays of the year. So they missed out.

And it is calming the waters in the US. Well done. But then, why even have markets? Why can’t Chinese authorities just set the price of each stock and make it go up at regular intervals, at a rate deemed to be appropriate by authorities? It would offer true risk-free investing in stocks. It could become a national wealth builder. The entire world would invest in such a scheme. Think of the possibilities! And it would be a lot more efficient than this haphazard guessing-and-manipulation game.

How can the media be so gullible? Read… What the Headlines about Tesla, Snap, and Twitter “Earnings” Should Have Said

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  50 comments for “How to Manipulate Stocks: Chinese Authorities Step in to Stop the Rout

  1. Frederick
    Feb 12, 2018 at 10:37 am

    This whole stack of cards is going to come crashing down and soon I feel it in my bones and those are some olde bones

    • cdr
      Feb 12, 2018 at 2:18 pm

      The Chinese case is different.

      You say ‘manipulate’. I say ‘maintaining stability’.

      Do you really want 1 billion+ investors who lost big (agree, very very very big potentially) looking for someone else to pay for it? Next, they might ask for something like our Bill of Rights. Since personal freedom is contrary to Chinese history, how do you think this might end up? If the people decide the govt has been taking advantage of them, what do you think they will think about you after a while? I imagine they will expect everyone else to pay for their former way of life. Including you.

      My advice, let the Chinese handle their own affairs and slap their wrists if they expect up to subsidize them. Nothing to see here. move along.

      • Joan of Arc
        Feb 12, 2018 at 6:02 pm

        Let the Chinese handle their own affairs? No way! They can’t be trusted to handle their own affairs. The US must handle their affairs along with all the others.

      • backwardsevolution
        Feb 12, 2018 at 8:47 pm

        cdr – “Nothing to see here, move along.” There’s plenty to see here. This is how a rigged casino works. And the Chinese are the best at rigged casinos. They like to launder their money through casinos and buy up, then force up prices of properties worldwide.

        Wish my government would hand out free money to me so that I could turn around and buy up Chinese land. Whoops, we can’t buy any land in China, can we? In fact, I don’t even think we can buy up their condos.

        Locusts.

        • roddy6667
          Feb 12, 2018 at 10:01 pm

          I own a home in China. Nice one in a high rise in a gated community. Let me guess. You have never spent any time in China, but you like to make statements about how things are in that country.
          The land is owned by the people (state). We have exclusive rights of usage and occupancy, just like anybody in America in an HOA, co-op, condo, PUD, PA, etc. However, we have NO property tax, which is rent paid to the real owner. In America you never really own the land. If you don’t pay the rent to the real owner, the government, men with guns will come to your house and remove you.
          We have 70 year property rights, which rolls over when 70 years is up. If the government wants the land for urban development or whatever, we get compensated. It is no different than eminent domain in America.

        • cdr
          Feb 13, 2018 at 8:14 am

          roddy6667,

          Thank you. You support my belief quite well with your reply.

          Imagine if your stable life were upended and replaced with property rights and total freedom, which also meant the state were no longer providing for you so benevolently, or in any way, except for some police protection and basic public safety.

          Thus, my statement about how we should stop imposing our beliefs on China, let China be China, and slap their wrists if they attempt to export their way of life or interests onto us without our permission or if they expect us to subsidize them in any way.

        • d
          Feb 13, 2018 at 6:38 pm

          “Thus, my statement about how we should stop imposing our beliefs on China, let China be China, and slap their wrists if they attempt to export their way of life or interests onto us without our permission or if they expect us to subsidize them in any way.”

          Awful lot of Wrist slapping to be done as they are still using unfair trade practices to force the world to subsidise them.

        • backwardsevolution
          Feb 13, 2018 at 8:18 am

          roddy6667 – my point is that foreigners cannot just march into China and buy up properties.

        • d
          Feb 13, 2018 at 6:45 pm

          WHICH IS WHY EUROPE AND P 44 ARE BLEATING RECIPROCITY.

          This is the new direction they are trying to move in . Anything we cant do in china, you cant do here.

          Its delicate to do, with out starting a trade war and will need some new laws to cover elements that will be viewed as discrimination in Europe and America.

          Also there will need to be time frames to allow the chinese to carry out various disinvestment’s.

        • fajensen
          Feb 13, 2018 at 9:47 am

          China has a pretty stable “China First” policy, while America is all organised about mobs with varying objectives. Of course a foreigner will not be allowed to take advantage of a Chinese, that just isn’t done.

          This may seem unfair in contrast with the US where it’s quite OK for anyone, everywhere on the planet, to screw over anyone who isn’t a “made man” – as long as one of the local mobs gets a cut of the action. But, that is not the fault of the Chinese. The Chinese just play the game that those mobsters made the rules for.

          There is plenty of free money being handed out in the US, a whole trillion-dollar deficit’s worth of it. It’s only that all of it exclusively goes to the various mob interests – DOD, mil-sec contractors, DHS, NSA, Wall Street, Big Oil, Big Agriculture … the Chinese didn’t make it so either.

          I.O.W. The Enemy is not that tribe all the way across the river, it is the tribe(s) right next door!

        • d
          Feb 13, 2018 at 6:47 pm

          “I.O.W. The Enemy is not that tribe all the way across the river, it is the tribe(s) right next door!”

          NO they are both the enemy and 1 empowers the other against us.

        • intosh
          Feb 13, 2018 at 12:43 pm

          @fajensen

          “The Chinese just play the game that those mobsters made the rules for.”

          “The Enemy is not that tribe all the way across the river, it is the tribe(s) right next door!”

          Best lines in the thread. Often, when Westerners talk about China, their opinion is often tinted with hypocrisy.

          The Mob’s strategy: divide and conquer — incite the local tribe to accuse the one across the river. It’s been working for centuries.

  2. Joan of Arc
    Feb 12, 2018 at 10:54 am

    In the spirit of Mao, they now have a stock market dictator. And he wants it to only go up.

    • kevin
      Feb 12, 2018 at 12:46 pm

      Despite your raising the flag of Orleans in the name of Truth, Honesty and Christiandom, the European CBs themselves are no different in spirit from the Maoist manipulators.

      They are also no different from the Japanese kamikaze CBs who owns most of the Nikkei.
      They are also no different from the American PPT cowboys over the past decade.

      We are ALL in in this together.whether you like it or not. The global economy is ONE singular ship now with all ye debt slaves yoked together with the ship.

      So be careful what you wish for.
      If you really want “true price discovery” (whatever the hell that means), just be prepared to drown first when the ship really sinks.

      You will die first before them CBs and their elite Masters of the Universe even feel the pinch. They may lose a Billion here or there and downsize their luxury yacht from a 50 footer to a 20 footer, but you… ye debt slaves and working poor will downsize from driving your Fords and Teslas to having not enough to even feed your family; if ever this whole charade crashes.

      The fact that you get up from bed every Monday and drag yourselves to work means you are reinforcing the CB behaviors too, because everyday you contribute to income taxes, 401ks and retirement funds means you implicitly contributed your time/money/life-energies for the greater cause of the financialized Kingdom, ruled by the CBs priests and the financial elites.

      You cannot simply walk away from taking on debt for your AMOLED 52 inch smart TVs, your Netflix subscriptions, your 4-wheeler gas guzzler, your beachfront holiday property and your endless consumerist lifestyle, right? Or can you?

      If you cannot give up your cycle of debt and consumption, then neither will the CBs. YOU are part of the problem.

      As long as you join the MATRIX, you give your little contribution, no matter how insignificant, to power this Matrix. Cumulatively, the system draws its enormous powers and abilities to interpret reality for you, and manage truth for its participating members, all from your little contributions to its power.

      Until you and you and you and you… start to walk away and find an alternative, then you all really have no choice but to continue to be debt slaves and working poor.

      Its depressing… I know.
      But all superstructures requires the Elite bourgeoisie class to sit atop the mass of slaves and the working poor.

      Whether you’re talking about the Roman Empire of old, the Egyptian pyramid structure, and ant colony or your current global economic system of haves and have-nots. Even communist systems require a well-fed Mao with multiple wives, or a very wealthy Putin to run the show and direct the equalized masses of workers.

      Someone’s got to call the shots while the rest work the slots. The likelihood of you ever calling the shots is truthfully very low, which is why they sell you the American Dream.

      • robert sills
        Feb 12, 2018 at 4:00 pm

        well said

      • WES
        Feb 12, 2018 at 7:21 pm

        Your Egpytian pyramid comment triggered a memory of an early morning conversation I once had with my Father when I was five or six years old!

        A history book I was reading showed an illustration of an Egpytian pharaoh sitting on his throne being fanned by several servants holding palm branches. I said to my Father; “It must have been wonderful to have been alive in the days of the pharaohs!” To which my Father replied quickly ending the conversation; “Son you would have been born a slave!”

        Yes, the Egpytian’s greatest contribution to how economics works was the pyramid scheme, not to mention my first lesson in economics!

        America’s greatest contribution to how economics works was the Ponzi scheme!

      • Frederick
        Feb 13, 2018 at 1:25 am

        Exactly correct so instead of that new flat screen buy some silver and stash it away for that “ rainy day” which might just be coming sooner than most think

    • intosh
      Feb 13, 2018 at 12:51 pm

      What’s the saying again? Something like “First take the beam out of your own eye, and then you will see clearly to remove the speck from your brother’s eye.”

      • d
        Feb 13, 2018 at 6:59 pm

        Its log and twig.

        Using it against America in support of china regarding the America stock Market and the CCP/ mafia State stock listings is hypocritical in the extreme.

        Do some American Corporates collude over US stock’s, probably.

        Does the FED Or the SEC “Detain” E Musk and tell him to buy X billion $ worth of Tesla or stay in a place much worse than this. like the CCP regularly does to chinese Stock owners, on the State Extortion list. when the west experiences Corrections that have contagious effects.

        The US had a correction. there will be other correction events this year. They may be managed, but not prevented the way they are in china. Watch for another large number of trading suspensions of stock’s in china. Another correction prevention tactic of the CCP/Mafia State.

  3. Tom
    Feb 12, 2018 at 11:04 am

    Isn’t that what we do here…with Fed intervention, stock buy backs, specialist manipulations for their benefit….haven’t we pretty much made it against the law for stocks to go down and stay lower for any appreciable length of time here…look how fast the ’08 crash came roaring back…only to make newer highs…and why????? Except for bubbles everywhere, and robbing savers and pensioners of their purchasing power through inflation…nothing’s changed…it’s all still an endless pile of debt both private and public; and growing…but let the good times roll…are the Chinese so different from the US and the West?

    • Old Engineer
      Feb 12, 2018 at 2:11 pm

      You have a very good point. In addition the Economist recently presented a summary of three papers which give statistical support to the fact that the US markets are rigged in favor of some traders and definitely against the individual as a buyer/seller. Combine that with the use of dark pools and you have to ask if their is a material difference.

    • Ed
      Feb 12, 2018 at 9:14 pm

      It’s all the same. Exactly the same. The President made the same point about the assassination of political opponents by other countries and by the U.S. during the campaign, I believe.

  4. Bead
    Feb 12, 2018 at 11:12 am

    It seems that we have a similar habit in the U.S., perhaps a different sort of oblique. What good is the “wealth effect” if you let the market go where it will? Here Fed singers jawbone whereas the Chinese leaked a directive. How long these “macro prudential” dams hold is another question.

    • RepubAnon
      Feb 12, 2018 at 1:38 pm

      This reminds me of the 1907 Panic, when J P Morgan ended the slide by making large personal purchases of stocks, and convinced others to do the same. The markets recovered – that time.

      He tried it again in 1929… and lost everything.

      • John
        Feb 12, 2018 at 6:24 pm

        =This reminds me of the 1907 Panic, =

        Are you THAT old,Mr RepubAnon ?

        If it is not the case your only source is written records.For some reason I believe the version of events described in “The Lords of Creation: The History of America’s 1 Percent” by Frederick Lewis Allen published in 1935.It was recently resurrected and reprinted.

        =He tried it again in 1929… and lost everything.=

        J P Morgan died in 1913.Discovering that his estate was worth $87M John D. Rockefeller shook his head and said “And to think,Mr.Morgan was not even a rich man”

      • John
        Feb 12, 2018 at 6:37 pm

        Also,just like the Fed does now,JP Morgan never made pesonal purchases of stocks to end this particular panic or to prop up the stock market.They both just loaned money to the banks.Stocks fluctuate but debts do not rot.

  5. KPL
    Feb 12, 2018 at 11:20 am

    Exactly. Why call it a market. ALL the central banksters have made it their play toy to do as bid. Can they do it for ever is the only question that remains? Also my mind boggles at the havoc that is going to be created the day they cannot. My fond hope is that ALL the central banksters get the rope and lamp post treatment next time round. Of what use is a Phd when u end up being a gangster terrorising savers, retirees, prudent people and pensioners. To state simply these central banksters are MONETARY GANGSTERS and be treated as such.

    • RepubAnon
      Feb 12, 2018 at 1:42 pm

      We could go back to the days of unregulated markets – look up “financial panic” to see how it works.

      The point here is that one needs to strike a balance between zero regulation and total government control. Finding the “Goldilocks Point” where regulations are just right is tricky.

      • KPL
        Feb 12, 2018 at 2:19 pm

        Catching a cold everytime the market sneezes is not regulation. It simply provides a put and creates moral hazard. IMO, QE1 was the only right thing. That also should have come with a heavier price.
        If you want to regulate it can be done. Here it is all about providing get-out-of-jail-free card to cronies including banksters and pulling wool over people’s eyes by holding up the stock market as a performance metric.
        ZIRP and NIRP is not regulation. It is legalized theft

      • Setarcos
        Feb 12, 2018 at 5:53 pm

        Financial panic is messy, but also a very healthy thing. Franklin’s quote about trading freedom for security is applicable here as well… soon you find out that you have neither.

  6. Drango
    Feb 12, 2018 at 11:25 am

    Wasn’t the last time China publicly propped up stocks the summer of 2015? Just about the same time they “devalued” their currency? Chinese officials like to work in the shadows. Making something like this public is not a good sign at all.

  7. Feb 12, 2018 at 11:30 am

    This has the feel of a domestic stock market firewall. When foreign owners of NYSE stocks pull out, the Chinese get nervous about their own market. Avoiding getting burned by a shift in global hot money requires a good old populist solution. Another sign the contagion is spreading.

    • Nicko2
      Feb 12, 2018 at 11:59 am

      Safe to say, the next black swan, unlike the last Asian Crisis in the 90’s, will be in China?

      • Bead
        Feb 12, 2018 at 2:09 pm

        Hard to say but the world banksters are playing in concert. I wouldn’t be too surprised if Europe was first to crash. But the U.S. is pedaling hard to catch up. Want some yield? Jump on that Club Med debt.

  8. gorbachov
    Feb 12, 2018 at 11:39 am

    If they buy the entire market and release some shares

    from time to time then maybe we would be willing to

    pay caviar prices for them . Unless of course we went on strike.

  9. LouisDeLaSmart
    Feb 12, 2018 at 11:56 am

    \\\
    Wolf, it’s like asking a 3 year old to drive a space shuttle. First you start of a tricycle, then a bicycle with an extra safety wheel, and it’s a long way to the shuttle (I love that nonfunctional overly expensive and complicated piece of history). And yes, it takes time to learn.
    \\\
    It has been shown that the “shock doctrine” of implementing new radical social and economic norms without introductory period (you are suggesting here in a way), is devastating. Look at what all the colored revolutions did in the world? Libya is a good example, Iraq too. Gradual, consensual, with regards to local culture and customs.
    \\\
    Yes they have a stock market for a while, but their economy is just in the last 10 years a big player. The US has 40 years of experience ahead of them. They will learn.
    \\\
    As long as there is a long term plan to detach the market from the central control, I am fine with short term intervention. If this is going to be a given that every downturn we have an intervention, then there is a problem…it’s not a market, it’s a “treasury stock”.
    \\\
    At the end of the day, the only difference is that the Chinese government does publicly what the US does in secret. All markets are controlled to a given extent.
    \\\

    • Dan Romig
      Feb 12, 2018 at 2:13 pm

      With all resect to Wolf’s commentary guidelines, Libya is not an example of “colored revolutions.”

      Qaddafi had the nerve to challenge the almighty petrodollar in the deals made with Royal Dutch Shell and BP prior to events occurring in the spring of 2011. In response, the CIA helped arm and train al-Qaeda in Banghazi.

      On 2 April 2011, Sid Blumenthal reported his dialogue with French Intelligence officers to then Secretary of State HRC. These were the concerns:
      1) France had a desire to gain more of Libya’s oil production
      2) An increase of French influence in North Africa
      3) The French military wanted to reassert its position in the world
      4) Qaddafi planned to support France as the dominant power in Africa

      There is a lot more on this chapter of the USA’s regime change and destruction in Libya, but that does not belong in WolfStreet.

      • LouisDeLaSmart
        Feb 12, 2018 at 4:56 pm

        I should have focused my comment more and spread the answer thinner. Apologize to the readers.

  10. Setarcos
    Feb 12, 2018 at 12:21 pm

    So glad to see that in China greed is managed appropriately by the regulators.

    • Alistair McLaughlin
      Feb 12, 2018 at 1:13 pm

      If managing greed was their objective, wouldn’t they put a ceiling over it, as opposed to a floor under it?

      On the other hand, if your comment was tongue in cheek, well done.

  11. Feb 12, 2018 at 12:41 pm

    China learned everything about stock market manipulation from the last nearly 9 years in America.

  12. OutLookingIn
    Feb 12, 2018 at 12:42 pm

    Emotional Control

    You may influence human emotional perception, but never control it, not totally anyway. The light of introspection on this, was used by Edward Bernays in his 1923 book, ‘Crystallizing Public Opinion’.
    However once human emotions begin to run amok, as in a herd or flock of animals stampeding, there is no stopping it until it has run its course. There is fear in the markets. There is no denying it and greed to. At the present it is slow moving but growing ever deeper and widespread, with each passing trading day. On the same level there is also greed. The fear of missing out.
    This “Yin & Yang” will play out longer, than market participants will have ever thought possible. How many dip buyers on Friday, will come to rue the day they doubled down? How many steady-as-she-goes holders will come to rue the day they didn’t sell when they had a chance to exit with minimal financial damage?
    This is the road down which the market takes its players, time and time again. Greedy and fearful hand-in-hand, running with the herd. Beware the catastrophe’s who continually cry out catastrophic market movements. This beast has time and room to run for years.

  13. Jim Graham
    Feb 12, 2018 at 1:22 pm

    What will happen when all the Chinese money leaves the US (and / or the EU) stock markets to prop up the market at home??

    Will that be considered an act of war?

    • Frederick
      Feb 13, 2018 at 1:32 am

      No it will not be It’s their money and they can do with it what they Please Of course the presstitute spin machine will make it into a reason for war no doubt Dangerous games Maybe Wolf Blitzer can lead a tank assault on China

  14. Bobber
    Feb 12, 2018 at 2:45 pm

    Is China saying they want people to take out debt to buy stocks? Sure seems like it. Is China saying they want people to quit jobs and become stock traders? Sure seems like it.

  15. Auld Kodjer
    Feb 12, 2018 at 4:04 pm

    You can change a random walk into a designated path, but if that path is on the edge of a dangerous cliff, a fall is inevitable.

  16. mean chicken
    Feb 12, 2018 at 4:25 pm

    Yep, we certainly were left to haphazard guessing, the US FED could’ve at least forwarded the Chinese memo in timely fashion as opposed to hanging us out to dry.

  17. Rates
    Feb 13, 2018 at 4:47 am

    They went to the best of the best for advice: https://www.reuters.com/article/blackrock-fink-china-idUSL1N11F1JL20150909

    That’s not the scary part though. It’s more that the Chinese are creating money like crazy.

  18. Jon Cloke
    Feb 13, 2018 at 11:01 am

    The GEC of 2007-2008 was the birth cry of a new system, one in which in the western liberal democracies it is now part of the system that taxpayers are on the hook when crashes come, as they will more fiercely – austerity is the simulacrum whereby public funds needed to prop up the decreasing number of bigger and bigger corporate actors in the financial services sector are recouped from sectors deemed no longer important – health, education, welfare etc.

    What China has done is just a different version of that, using state-command capitalism to force different actors within the system to undertake reinforcing actions through different conduits. The problem is that although moral hazard was always a fraud, reinforcing fraudulent behaviour by throwing more money at it creates a) a *lot* more fraud and b) a fraud-based system of such complexity that it becomes impossible to prop up…

    At a certain point, the self-reinforcing, fraud-induced ripple effects within this system will become a) too big and b) too fast for even a globally-coordinated cartel of governments (including the Chinese and US governments) prepared to throw limitless tax money and create limitless e-reserves to counter, because the complexity of the system thus created will become impossible to read..

    As I’ve said countless times before, what happens when Too Big To Fail becomes Too Big And Complex To Save?

    • Javert Chip
      Feb 13, 2018 at 9:02 pm

      Jon Cloke

      There is and never has been such a thing as “state mandated capitalism”.

      Call it what it really is: state mandated socialism.

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