Thursday Market Fuel – Toa Chie PBOC!

The PBOC threw 365Bn Yuan ($58Bn) into the Financials this morning.  

At just about 1 am (1pm in Shanghai) the PBOC announced a POMO-type measure that sent equities flying off the floor at 2,000 – firing the market up 3% to 2,060 in less than 20 minutes (not good for the bears!) and settling out at 2,056 – up 2.6% with promises of MORE FREE MONEY to come.  

The Hang Seng finished the day up 234 points (1.1%) and even the Nikkei turned green on the news, moving from an open at 8,850 to close at 8,949.  Rumors were, of course, flying that more stimulus was on the way and no one wanted to be caught short ahead of a week-long holiday for the Chinese markets next week.  Shanghai Securities News, operated by the Xinhua News Agency, said there was speculation the CSRC would announce 10 measures to boost equities while Zheshang Securities Co. said there was market talk the regulator might suspend IPOs.

“Stocks are up because of the speculation that there's an announcement about IPO reform later at 4 p.m.,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Even if it is true, it will be a short-term rally because the main issue is economic growth. After reaching new lows yesterday, investors are also finding excuses to buy today and make quick profit before the last day of trading tomorrow.”

The Shanghai Composite has lost 7.6 percent this quarter, the most in a year, and is the worst performer among global markets after Cyprus and Mongolia. It's valued at 9.5 times estimated earnings, compared with the average of 17.9 since Bloomberg began compiling the weekly data in 2006.  All part of the reason I said yesterday that China was bottoming at 2,000.  

Also bottoming yesterday was oil at $90 but we got all the way down to $89 before it finally turned around.  As you can see from Dave Fry's USO chart, that $33 line is very solid support but we're a little wary of using oil for more than a day trade as there is still a massive glut of inventory as well as a massive glut of open NYMEX contracts for oil that no one really wants. 

We went into all that nonsense last week, when we caught the $10 drop…