Chinese equities are rising—but not for the reasons bulls would hope. Over the past three sessions, state-backed funds known as the “national team” have ramped up last-minute buying in favored ETFs like Huatai-Pinebridge CSI 300 and China AMC SSE 50. This defensive push, likely backed by unlimited liquidity from the People's Bank of China, has nudged the Shanghai Composite into an eight-day winning streak—its best run since October. But dig deeper, and it's clear this is more about engineering stability than any surge in investor conviction.
Under the hood, things aren't as rosy. Turnover in both Shanghai and Shenzhen is thinning out. Market breadth is deteriorating. Over half of all onshore stocks have posted losses this week, with gains narrowly concentrated in large-cap names. The timing of these ETF buy-ins—consistently in the final 20 minutes of trading—suggests they're designed to hold key index levels rather than spark a broader rally. Retail money? Still sitting on the sidelines. And despite the state support, there's no indication this momentum is organic.
This quiet intervention follows record inflows into mainland ETFs last week, as Beijing braces for what could be a tough second half of the year. With U.S. tariff threats escalating, especially under the shadow of a potential Trump 2.0, China's leadership appears determined to shore up sentiment before it cracks. But here's the real story: this isn't a rally built on fundamentals. It's a backstopped bounce—state-driven, narrowly focused, and walking on thin ice.
