China’s equity markets endured another turbulent session Monday, with most indexes ending lower as frantic government intervention saved many larger cap stocks from losses.

Broader equity indices, such as the CSI 1000, which tracks 1,000 or so stocks across both the Shanghai and Shenzhen exchanges, fell more than 6%. The CSI 100, which tracks only 100 of the biggest stocks on both exchanges, climbed 1%. The Hang Seng index in Hong Kong fell just 0.2%.

The iShares MSCI China ETF (NYSE:MCHI) lost 1.8% on Friday, but looked set for gains on Monday as it tracks the stocks that saw the biggest benefits of government market intervention.

These included stocks such as China Citic Bank (OTC:CHCJY), which climbed 4.4%, China Life Insurance (OTC:CILJF), up 3% and PetroChina (OTC:PCCYF), with gains of 2.6%.

At one point Monday, nearly 30% of all stocks on the CSI 1000 were suspended on a limit down — having lost 10% or more.

China’s Government Intervention: Pledges Aplenty

The uneven nature of the losses surprised many, with some suspecting the authorities were targeting mainly large cap stocks. Or, that broad stimulus would unevenly benefit large caps as investors would have more confidence in their survival — thus dumping investments in small caps and switching to larger companies.

Over the weekend, China’s Securities Regulatory Commission pledged to stabilize the country’s markets, but offered no details on how this was to be achieved, other than saying it would guide more medium- and long-term funds into the market and clamp down on practices such as short selling.

Indeed, it subsequently suspended stock borrowing via exchanges for the purpose of short selling, while some investors were told not to sell their positions — mainly quant funds being unable to cut leveraged positions.

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On X, the Kobeissi Letter said: “Even as China has vowed to stabilize its markets, investors are worried. Many believe that China will focus primarily on large cap stocks. Hence why there’s a huge disconnect between large and small caps now.”

Bank of America noted strong inflows into China stocks over the last two weeks: $6.3 billion last week and $11.9 billion the week before — likely from government sources as it looked to stem the flow from indexes that endured their worst week in five years, and that saw some fall to five-year lows.

On Friday, Nikkei reported that foreign investors sold a net $2 billion of mainland Chinese shares in January, the sixth consecutive net monthly outflow and the strongest since the Stock Connect trading link between Hong Kong and the mainland was established in 2014.

A Chinese academic, Liu Yuhui of government think tank Chinese Academy of Social Sciences, said the authorities should set up a $1.4-trillion stabilization fund as soon as possible to help boost market confidence.

China Investors Take To Social Media

The mood of investors was sour with thousands taking to social media to vent their frustrations.

A post on the U.S. Embassy’s Weibo site about giraffe conservation turned viral as Chinese investors began criticizing the government’s lack of action.

Private investor Jim Zhou said on X: “It’s very sad thing to say but this is the ‘white paper’ moment for the stock market. This is an extreme overreaction because people believe the paper they’re holding onto is worth nothing.”

Kyle Bass, CIO at Hayman Capital Management, said on X: “So much for ‘The East is Rising, The West is Declining’ narrative. China's core is collapsing: real estate, banking system is in crisis, local government debt is in default, youth unemployment is in crisis, and is in population decline.”

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