Unintended Consequences From China’s Stock Market Intervention

Even with trading halted on over a thousand stocks and strenuous government efforts to provide a floor, the Shanghai Composite is down another 5.9% today, but that’s partially because individual stocks are capped at a daily loss of 10% and about 40% of the market has been frozen completely. Even after extraordinary policy intervention, we’re seeing just how difficult it is for a government to actually control the market.

Quick regulations come with unintended consequences

“The index futures exchange CFFEX caps the daily limit of one-way new positions to 1,200 lots for the mid/small-cap CSI500...