Desperate Moves in China

Now that my new book has been published, I am beginning to catch up on my very long list of outstanding research projects. In addition, I am also finding more time to read timely articles, a few of which I would like to pass along to Trader Edge readers. Here is a link to an interesting MarketWatch article titled "Opinion: Why Beijing cannot let its bull market die."

The author (Craig Stephen) highlights a number of extreme steps Beijing has taken recently to prop up Shanghai's free-falling equity shares:

1) Brokerages will invest 15% of their net assets in a new stock-stabilization fund, which will be used to purchase equities,

2) New issues will be suspended, which will funnel more cash into existing issues,

3) The central bank provided a liquidity pledge, and

4) Real Estate (arguably also in a bubble) will now be allowed as collateral for margin loans.

The above steps smack of fear, desperation, and direct market manipulation - not good news for the world's second largest economy.

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About Brian Johnson

I have been an investment professional for over 30 years. I worked as a fixed income portfolio manager, personally managing over $13 billion in assets for institutional clients. I was also the President of a financial consulting and software development firm, developing artificial intelligence based forecasting and risk management systems for institutional investment managers. I am now a full-time proprietary trader in options, futures, stocks, and ETFs using both algorithmic and discretionary trading strategies. In addition to my professional investment experience, I designed and taught courses in financial derivatives for both MBA and undergraduate business programs on a part-time basis for a number of years.
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