China Shows Mnuchin How It's Done As Beijing's Plunge Protection Team Reverses Stock Rout

One day after Steven Mnuchin convened the President's Working Group on Financial Markets, also known as the Plunge Protection Team, only to see a record Christmas Eve drop in US stock markets, China showed the US how market manipulation is done.

With only a handful of Asian markets open on Christmas Day, and with Nikkei 225 plummeting 1000 points as Japan's blue-chip index closed a whopping 5% lower and entered a bear market, China's stocks similarly started the day off on the back foot with both the Shanghai Composite and the SSE 50 Index of the country’s largest stocks sliding around 2.5% in early trade. However, all that reversed in the afternoon session when the Chinese National Team came in and started buying mostly financial stocks, lifting the country's markets and pushing the Composite back over 2,500, ending with a loss of just 0.9%.

Agricultural Bank of China added 0.9% on Tuesday, erasing a drop of 0.6% thanks to the burst of late day buying. Bank of China rose 0.6 percent, and Bank of Communications rose 0.4%. China Southern Airlines rose 1.9 percent as the best performer on the SSE 50 measure, erasing a slide of 1% in the morning.

Meanwhile, an index of energy stocks was the worst performer among the CSI 300 Index’s 10 industry groups, falling 2.1% as crude fell to the lowest level in a year and a half. China Petroleum & Chemical and PetroChina lost at least 2%. Earlier in the session, Chinese oil futures for March delivery fall by the 7% daily limit from Monday’s settlement price to 351.6 yuan/bbl ($51.12) on Tuesday in Shanghai as the global oil rout leaves no market unscathed.

"The gains by big banks and insurers suggest state buying, and some funds may also be bottom-fishing stocks," said Dai Ming, a fund manager with Hengsheng Asset Management. Kang Chongli, a Beijing-based strategist with Lianxun Securities told Bloomberg that the 2,500 level "is both a policy and technical bottom" for the Shanghai Composite Index. The index closed just above it, at 2,504.82.

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