China has redoubled efforts to revive its faltering financial markets, and a major Chinese state investment fund pledged to expand its purchases of stock index funds
From
ELAINE KURTENBACH ` business journalist
February 6, 2024, 12:15 a.m. ET
3 minutes read
BANGKOK – A Chinese state investment fund vowed to expand its purchases of stock index funds, signaling, among other things, Beijing's determination to stabilize markets that have sunk under intense selling pressure from a housing crisis and a slowing economy.
Stocks in Shanghai and Hong Kong rose sharply on Tuesday following the announcement by Central Huijin Investment, whose subsidiaries include Chinese state-owned banks. Gains accelerated after a Bloomberg report said Chinese President Xi Jinping would meet with market regulators.
The report, which cited unnamed people who spoke privately, could not immediately be confirmed. It also said the timing of the meeting was unclear.
Central Huijin has stepped up purchases of shares in state-owned banks and other companies to counter heavy selling pressure in Chinese markets, which are trading at their lowest levels in five years. However, Hong Kong's biggest gains on Tuesday were tech companies such as e-commerce giant Alibaba, up 7.6%, and JD.com, up 7.8%.
The Shanghai Composite Index rose 3.2% and Hong Kong's Hang Seng gained 4%. The Shenzhen A-Share index rose 5.2%.
The benchmarks made up all or most of their monthly losses, but are still well below their previous year's level.
Over the weekend, the market regulator warned it would crack down on market manipulation, insider trading and other abuses and vowed to protect smaller investors who typically account for the bulk of trading in Chinese markets.
Benchmarks in Shanghai and the smaller Shenzhen market fluctuated between small gains and big losses on Monday, while share prices of state-owned banks and other large companies rose.
China's securities regulator welcomed Central Huijin's announcement on Tuesday, saying the “historically low level” of its stock prices underscores its medium and long-term investment value.
“We strongly support Central Huijin to further increase the scale and intensity of its holdings, and will create more favorable conditions and smoother channels for its market entry activities,” it said in a statement. It promised to “make every effort to maintain the stable functioning of the market.”
It said it would also facilitate stock purchases by institutional investors such as public funds, private equity funds, securities firms, social security funds, insurance institutions and pension funds, and encourage companies to increase their share buybacks.
In a separate notice, the CSRC urged companies to increase mergers, acquisitions and restructuring to increase the value of listed companies and “enhance investors' sense of profits.”
“A large number of listed companies have improved their quality and efficiency through mergers, acquisitions and restructuring, and become better and stronger,” it said.
It was unclear whether such moves would be enough to turn the tide that has roiled markets, despite a flurry of moves to instill confidence and support property developers whose financial problems followed a government crackdown on excessive borrowing represented a major burden on the economy.
In other developments, a trade ministry official announced measures to encourage people to renovate their homes, buy household appliances and trade in their cars for new ones.
“Cars, home appliances and home furnishings are at the heart of traditional consumption and are closely linked to people's lives,” the official Xinhua news agency quoted Sheng Qiuping, a vice commerce minister, as saying.
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