"China rolls out $112 bln funding schemes to bolster stock market"

 From Reuters, October 18:

China's central bank kicked off two funding schemes on Friday, that will initially pump as much as 800 billion yuan ($112.38 billion) into the stock market through newly-created monetary policy tools.

The People's Bank of China (PBOC) spelt out operational details of the swap and relending schemes first announced in late September, aiming to support "steady development" of capital markets.

China's recent market bull run has been losing steam as euphoria turned into caution over the size and implementation of Beijing's stimulus promises. The benchmark CSI300 Index (.CSI300) reversed early losses and ended the morning session up 0.8% on Friday.

Under the swap scheme, initially worth 500 billion yuan, brokerages, fund management firms and insurers can obtain liquidity from the central bank through asset collateralisation to buy stocks.

 

Currently, 20 companies have been approved to participate in the scheme and initial applications have exceeded 200 billion yuan, the PBOC said.

 

"The swap scheme will become a market stabiliser" as demand for the tool rises when stocks are over-sold, but the appetite naturally fizzles when the market recovers, Xinhua Financial said in an article on Friday....

....MUCH MORE

As noted in the introduction to an August 15 post:

For two years our econ/investment thesis on China has been centered on the observation that any stimulus the Party/government employs, it will not be directed at rekindling residential construction. There is simply too large a black hole of debt-financed over-building sucking up every yuan/renminbi that comes near it to allow anything beyond Cantillon effects i.e. redistribution from those furthest away from thos furthest away from the financial injection sites (the people) to those closest (the nomenklatura and other connecteds)....

And back in October 2023:

"China Considers Stimulus, Higher Deficit Spending To Counter Property Bust"

I smell Oscar Cantillon. 

In which case the thing to do is determine who will get the money first and be that person. If it is not possible for you to quickly become a member of the Chinese nomenklatura determine how to make a portfolio bet on those who are already members of the privileged class. As noted a few years ago:

One of the rules of politics is "if your country goes communist you want to be as far up the apparatchik totem pole as you can get."
Preferably a commissar or above, putting you and yours closer to the commissary.

In a socialist paradise all pigs are equal but Hugo Chavez's daughter is a billionaire. 
(actually $4.2 billion)

We've looked at the probable results of China's attempts to reflate a few times, usually coming down to the Cantillon effect. Here Mssr. C. and his effect show up in a June 2023 discussion of pork: "What's that Got To Do With The Price Of Pork In China?"

....The negative spin on the rate cut would be the one we used on Tuesday, that it's classic "pushing on a string" i.e. the problem isn't the cost of money but rather the lack of demand for money.

In this sort of situation, if the money isn't going into domestic demand in will go into financial assets. In the West the Central Bankers say about that reality "We meant to do that, it's the Wealth Effect' whereas it's actually the Cantillon Effect where the people who get the money first get to take advantage of prices that haven't yet moved and are thus lower for them than for those who follow them in. 

Unfortunately for us, this time it is tougher to distinguish between a real demand driven move and a speculative "close-your-eyes-and -bet-on-higher" than it was in January, for another very basic reason: We had the Chinese lunar New Year on January 22 to tip us off....