Nearly two months since Beijing rushed to the aid of its battered markets, stocks appear to have stabilized, and now investors are wondering: what next for China's market intervention?
Shanghai equities have climbed 3.6 percent over the past 30 days after officials unleashed a wave of bold stabilization policies starting June 27 in a bid to halt panic selling and prevent a systematic crash.
By allowing a trading halt on equities equaling almost half the market and instituting a ban on shareholders selling their stocks, the government was "digging itself deeper into the unwanted role of lender of last resort for the economy and buyer of the last resort for the stock market," Lim Say Boon, DBS chief investment officer, remarked in a note on Friday.
Indeed, it's not in Beijing's interest to continue since aggressive intervention dents investor confidence and goes against the country's goal of pursuing market-oriented reforms.
"How the government will exit its market bailout has therefore become a key concern. Investors should prepare themselves for a slow and painful process," one that could last more than six months and likely involve more market declines, BNP Paribas warned in a report on Friday.
BNP set out out the steps Beijing could take to extricate itself from markets: