A Desperate China Begged Fed For “Plunge Protection Playbook” As Its Market Crashed
by Tyler Durden
ZeroHedge.com
03/21/2016
Last June, China’s stock market miracle ended in tears.
The SHCOMP’s inexorable, parabolic ascent was to a large degree facilitated by an explosion of margin debt, the likes of which could not be found in any other major market across the globe. For instance, by the end of June, the outstanding balance of margin transactions as a percentage of the SHCOMP’s free float market cap was nearly 14% compared to just 5.5% for the S&P and less than 1% for the TOPIX.
A dramatic unwind in the half dozen backdoor margin lending channels that had funneled an additional CNY1.5 trillion into equities brought the party to a thunderous end and by late July, the market was off by more than 30% from its peak.
Chinese officials had already begun to panic by mid-month and then, on the 27th, the bottom fell out.
A harrowing bout of late day selling led the SHCOMP to post its worst one-day drop since February of 2007 and its second worst single session decline in history as the market collapsed by 8.5%.
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