Short-selling in the stock market, central banks of various countries have launched a global rescue mobilization

Short-selling in the stock market, central banks of various countries have launched a global rescue mobilization

As for whether the world will repeat a financial tsunami similar to 2008, some experts said that if the response is timely, the stock market quake is still hopeful to save.

Plunge, fuse, rescue the market .... . Became the key word of the global stock market this week.

Affected by the spread of the global epidemic and the oil price war, global stock markets have begun a bloody week. According to incomplete statistics, on the 12th, the stock markets of 11 countries had "melted out." If we add the Kuwaiti stock market that had been blown out in the previous trading day, the stock market in 12 countries has triggered the blowout mechanism due to the plunge in the past week.

As for whether the world will repeat a financial tsunami similar to 2008, some experts said that if the response is timely, the stock market quake is still hopeful to save. With a 30% decline in the short term, central banks around the world will act instead of being indifferent. Before the Federal Reserve and the Bank of England both cut interest rates, and now there should be emergency measures in place, and the rescue action is urgent.

"Share God" Buffett said that he has witnessed many times in his life that Wall Street was shrouded in panic, "If you persist for a long enough time you will see everything in the market, I will have this experience at the age of 89. Facing the current public health incident and the impact of oil on the market, Buffett believes that it is not as bad as it was in 2008 or 1987.

11 countries' stock markets plummet, "fuse"

On March 12, the three major US stock indexes all triggered a fuse within 10 minutes after the market opened. It is worth mentioning that the first meltdown of US stocks occurred in 1997, and the second was on March 9, 2020, 23 years later. And on the 12th three days later, the third meltdown in the history of the US stock market occurred.

As panic sentiment caused by U.S. stocks spread to global financial markets, the global market ’s “melt-out” concentrated outbreak, including Brazil, Canada, Thailand, the Philippines, Pakistan, South Korea, Indonesia, Mexico, Colombia, Sri Lanka and other 10 countries ’stock markets. Mechanism, trading was suspended during the session.

Among them, the Brazilian stock market closed at 72,582 points, a drop of 14.78%, the largest single-day drop since 1998. At the opening of the day, the Brazilian stock market plummeted, triggering the fusing mechanism twice. Among them, the second drop was more than 15%. According to regulations, the stock market was suspended for one hour. This is also the fourth time in the history of the Brazilian stock market that there are two single-day fuses.

According to Wind statistics, all MSCI country indexes have entered a bear market due to the outbreak. The MSCI World Index for all countries once fell by 1.9%, its lowest level since January 2019. According to statistics, 14 stock markets worldwide have entered a "technical bear market."

In addition to the stock market, crude oil futures continued to plunge, and the precious metals gold and silver were not spared. Warren Buffett said the plunge was as scary as "Black Monday" in October 1987.

Some analysts believe that global financial markets have entered a "crisis", and only in times of crisis will there be such huge changes in various types of financial assets, and that there will be wide fluctuations across broad asset classes.

Short-term stock bans in many countries

Affected by the huge shocks in global financial markets, countries have announced a temporary ban on short selling. So far, six countries including Spain, Thailand, Italy, the United Kingdom, South Korea, and Turkey have introduced measures to ban short selling.

March 12

● The Spanish National Securities Market Commission (CNMV) announced that during the trading hours on March 13 (Friday), it is prohibited to short-sell all tradable shares that fell more than 10% on March 12, and all non-currents that fell more than 20%. Shares, involving a total of 69 stocks.

● The Italian Financial Market Supervisory Authority (CONSOB) announced a temporary ban on short selling on March 13. It applies to 85 stocks listed on the Italian stock exchange.

March 13

● The chairman of the Thai Stock Exchange stated that the short-sale rules will be temporarily adjusted, and the measures will continue until the end of June.

● The UK Financial Conduct Authority temporarily bans some short-selling instruments and transactions, including short-selling of stocks, and short-selling of certain Italian and Spanish financial instruments.

● According to an email announcement issued by the Korean Financial Services Commission, from March 16 to September 15, South Korea will ban short selling of stocks traded on Kospi, Kosdaq, and Konex. A temporary ban on stock shorts is the first similar move since 2011.

February 28

● The Turkish Capital Market Board (CMB) has announced that the market is prohibited from shorting shares on the Istanbul Stock Exchange.

The Federal Reserve has rescued the city one after another, and central banks in various countries have enlarged their moves

After the three major U.S. stock indexes fell collectively by 7% on the opening day, Trump stated that he would provide an additional $ 200 billion in liquidity to stabilize the market, and asked Congress to add $ 50 billion to the Small Business Administration.

However, the market does not seem to buy it! At the same time as Trump's speech, U.S. stock futures once again collectively collapsed. Among them, the Nasdaq futures fell to 7,600 points and triggered a fuse, a drop of more than 5%. This is the third time in the history of the US stock market and the second time this week.

After the second meltdown of U.S. stocks, the New York Fed made an emergency move and announced a three-month repurchase operation worth US $ 500 billion, plus one-month market operations of US $ 500 billion, and completed at least US $ 220 billion in two weeks. In order to save the market, the Fed has cut interest rates by 50 basis points.

Just now, according to foreign media reports, US Treasury Secretary Mnuchin said that the Fed and the Treasury Department are striving to provide "unlimited liquidity."

The CICC research report pointed out that tight liquidity in the US Treasury market was the main reason for this emergency operation. Recently, the liquidity of the US dollar is indeed tight, which is reflected in the rapid appreciation of the US dollar, the swap base between the euro and the yen against the US dollar has widened significantly, and inter-bank liquidity may also be tight. Therefore, not only the national debt market, but the overall market liquidity is tight. CICC believes that this increase in liquidity demand may be related to the decline in market risk appetite caused by the fermentation of the epidemic, the rise in cash demand, and the increase in cash reserves of enterprises in response to the risk of the epidemic.

In addition to the United States, other central banks have also taken measures.

March 2

● The Bank of Japan: It is reported that the central bank proposed to buy 500 billion yen of Japanese government bond repurchase futures, after Kuroda promised to take action when necessary;

March 12

● The Bank of Canada: Temporarily increased the repurchase operations for 6-month and 12-month fixed-term periods, and the repurchase operations have been extended to all periods, at least once a week;

● The Indian central bank: Auction of USD 2 billion USD / rupee swap started on March 16th, ready to take all necessary measures to ensure the normal operation of the financial market;

March 13

● Indonesian central bank: It will purchase 3 trillion Rupiah government bonds. Since the outbreak of the new crown pneumonia epidemic, the central bank has invested Rupiah 110 trillion to buy government bonds;

● Mexican Central Bank: Announced a USD 2 billion foreign exchange hedging tender to increase the size of government bond swaps on Friday to 40 billion Mexican pesos to curb peso volatility;

● The Bank of Colombia: Announced a new non-deliverable forward foreign exchange (NDF) mechanism that will provide the market with more Colombian pesos and US dollar liquidity;

● The Bank of Korea: The South Korean side said that if necessary, South Korea will take further action to stabilize the stock market; it will take measures to stabilize the foreign exchange market when necessary.

● Australia's central bank: Provides a lot of additional liquidity to cope with the spillover effects of global shocks affecting the Australia and New Zealand region. In announcing this month's rate cuts on March 3, Governor Philip Lowe said that the RBA was ready to ensure sufficient liquidity in the financial system.

The RBA has invested A $ 8.8 billion ($ 5.5 billion) in open market operations, compared to a previously planned A $ 3.7 billion. The difference is the biggest difference since the RBA adjusted its approach in November 2013.

Under the joint rescue of countries, the Australian stock market fell from 7% to 4%, the Japanese stock market fell from a maximum of 11% to 6%, and the US Dow Jones Index futures fell from a maximum of more than 3% to a maximum of more than 2%.

A shares also rebounded strongly. As of the close, the Shanghai index fell to 1.23% at 2878.43 points, the Shenzhen Component Index fell 1% to 10831.13 points, and the GEM index fell 0.75% to 2030.58 points.

It is worth mentioning that according to the announcement of the Ministry of Foreign Affairs on March 13, the G-20 finance ministers and central bank governors agreed in the latest statement to use all feasible policy tools, including appropriate fiscal and monetary measures.