China volatility returns
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Last week, the entire country of China somehow became a meme stock. Now the party looks as though it's over — for the time being.
Why it matters: China's leadership is attempting something very delicate and difficult — it wants to boost the economy without inflating a speculative bubble in asset prices.
The big picture: At the end of September, China rolled out a suite of policies designed to put an end to the country's economic slump. It cut rates, promised to boost government spending, pledged that property prices wouldn't fall any further, and rolled out support for private industrial companies.
- The measures helped ignite a stock market rally — which was then immediately put on pause in the first week of October, Golden Week, when markets were closed.
- Golden Week wasn't observed in the rest of the world, however, where U.S.-listed Chinese stocks and even the oil price kept the China rally going.
Follow the money: Over the course of Golden Week, the list of the most-active stocks on Interactive Brokers, a platform popular with fast-twitch retail investors, was dominated by Chinese tickers.
- The third most popular stock overall — behind only Nvidia and Tesla — was YINN, a leveraged ETF designed to provide three times the daily return of the Chinese stock market.
- The top 10 included Chinese e-commerce giant PDD Holdings, Alibaba; and Chinese fintech companies UP and Futu.
Driving the news: Chinese stocks fell on Wednesday after the government announced a stimulus much smaller than investors had been hoping for.
- It's possible the government had originally intended to announce something bigger but scaled back the announcement after seeing the frothiness in the markets.
Zoom out: As Axios' Ben Geman has reported, a similar phenomenon was seen in the oil market, which rose on hopes of Chinese government stimulus — and then fell when those promises failed to materialize.
The bottom line: Chinese President Xi Jinping has made his disdain for speculators clear — even as he also wants to ensure a reasonably healthy economy.
