China’s stock market rescue brings in reinforcements

China’s “National Team” are rolling out further measures to stabilise mainland stocks
After opening sharply lower, indices such as the A50 are now surging higher
To date, measures to promote market gains have typically not lasted more than a couple of days

China’s “National Team”, the nickname given to state-backed entities tasked with rescuing markets whenever they deviate too far from the government’s desired path, are doubling their efforts, upping purchases of exchange-traded funds (ETFs) while restricting certain undesirable activities detrimental to stock prices.

National Team moving closer to going “all in”

Fresh from going public about increased ETF purchases in October, Central Huijin Investment, a division of China’s sovereign wealth fund which collects stakes in financial firms, said it will continue to increase holdings of ETFS to maintain the smooth operation of the capital market. It released a statement noting it “fully acknowledges the value in the A share market”, coinciding with a sharp turnaround in mainland stocks which opened lower on Tuesday before suddenly ripping higher.

China’s securities regulator, the CSRC, said in a separate statement it will guide institutional investors to increase stock allocations while encouraging listed firms to increase share buybacks. Before trade, Bloomberg reported Chinese authorities had tightened trading restrictions on domestic institutional investors as well as some offshore units to help stem the nation’s deepening bear market.

The latest announcements are just the latest in a long line of measures we previously covered on the site. The big question is whether it will work beyond the ultra-short term to bolster market returns? While it feels like we’re getting closer to an “all in” moment as part of the stock rescue plan, measures that have been rolled out so far have simply not worked.

China A50 futures through key resistance level

Looking at the daily chart of China’s A50 futures, the current candle is big and bullish, taking futures towards the highest level since early 2024. Importantly, should futures manage to hold above the 50-day moving average – a level they have not closed above since September – it may help to increase confidence that this latest bounce may be a little longer than fleeting.

Given how respectful futures have been of the 50DMA recently, a close above this level provides a decent location for traders to place stop-loss orders below if intending to initiate long positions. Above, resistance is located at 11400, 11550 and around 12120, the latter part of a major downtrend dating back to early 2021. The 200DMA is located just above, making this a key level for traders to watch, if and when it gets there.

-- Written by David Scutt

Follow David on Twitter @scutty

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor