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SHANGHAI: Chinese stocks have staged a nascent recovery from a US$7 trillion rout, thanks to intensifying rescue efforts as authorities seek to prevent the market from slumping for a fourth straight year.
The benchmark CSI 300 Index has gained 5.2% so far this week. The rebound came after a quickening drumbeat of policy support, which included replacing the market regulator and wider trading curbs as well as state buying of major bank stocks.
News that regulators planned to brief President Xi Jinping on markets also fuelled optimism.
Chinese leaders are under mounting pressure to act more resolutely to end a stock-market meltdown that risks undermining financial and social stability, at a time when the economy is mired in worsening housing woes and persistent deflationary pressures.
Authorities also appear keen to prevent a weak market from further dampening already anemic consumption as China enters the Lunar New Year holiday week.
Here’s a list of measures that have either been announced or reported on to start the year as China seeks to aid the economy and calm investors.
In a surprise move after markets had closed for the day, Beijing replaced the head of its securities regulator.
Wu Qing, a banking and regulation veteran who earned the reputation as “the broker butcher” when he led a crackdown on traders in the mid-2000s, is replacing Yi Huiman as chairman and party chief of the China Securities Regulatory Commission, according to Xinhua.
> Funding support for developers
China’s financial regulator calls for further prompt implementation of a financing coordination mechanism to support developers.Regulators plan to brief Xi on the market as soon as Tuesday, Bloomberg News reported. While it’s unclear whether any new support measures will come out of the Xi meeting, traders are hoping this time will be different.
Central Huijin Investment Ltd, the unit that holds Chinese government stakes in big financial institutions, said it would buy more exchange-traded funds.
The securities regulator vowed in a follow-up comment to maintain stable market operations, adding that authorities will continue to guide various institutional investors and funds to enter the market with greater efforts.
China will strongly support listed companies to enhance their investment value through mergers, acquisitions and restructuring, the China Securities Regulatory Commission said in a statement.
The so-called national team has bought roughly 70 billion yuan (US$9.7bil) of onshore Chinese shares in the past month, according to estimates by Goldman Sachs, adding that 200bil yuan or down 0.8% of free float market capitalisation is needed to stabilise the market.
The national team refers to a group of Chinese state funds tasked to support markets. Meantime, overseas investors, which may include offshore proxies for such state funds, bought another 1.7 billion yuan of mainland stocks via trading links with Hong Kong Wednesday, marking the seventh consecutive session of inflows.
> Restricting sales
China is tightening trading restrictions on domestic institutional investors as well as some offshore units as authorities fight to stem a deepening stock rout.
Officials this week imposed caps on some brokerages’ cross-border total return swaps with clients, limiting a channel that can be used by China-based investors to short Hong Kong stocks, said the sources.
At the same time, some Chinese brokers that use the channel to buy mainland shares for their offshore units were told not to reduce their positions.
> Monetary stimulus
Beijing added about one trillion yuan into markets on Monday with the previously announced cut to banks’ reserve requirement ratio taking effect.
That has helped keep cash ample, with money markets showing few signs of stress.
China’s regulatory officials visited listed companies in 20 provinces and municipalities from Jan 29 to Feb 4, according to a statement from China Securities Regulatory Commission.
Regulators are accelerating their process to solve issues raised by listed companies on taxation policy, financing, land, imports and exports, as well as intellectual property right protection.
> Help for home builders
Cash-strapped Chinese property developers said a range of their housing projects have been listed as eligible for funding under the latest programme to support the ailing sector.
The flurry of activity comes just three weeks after Beijing urged local authorities to draft a list of projects eligible for funding.
Policymakers want risk-averse banks to step up lending to the real estate sector, which saw credit growth slow to the weakest in more than a year last quarter, undermining developers’ ability to complete homes.
China stock traders are unwinding their margin debt rapidly, underscoring how a prolonged sell-off may be leading to some forced share liquidation.
In response, the securities regulator said it will guide brokerages to adjust their margin call levels and maintain “flexible” liquidation lines in an effort to reduce pressure from forced selling of pledged shares.
> Preventing ‘abnormal fluctuations’
The China Securities Regulatory Commission vowed on Sunday to prevent abnormal fluctuations, saying it would guide more medium and long-term funds into the market and crack down on illegal activities including malicious short selling and insider trading.
> PBoC supports housing and infrastructure
The People’s Bank of China (PBoC) provided 150 billion yuan worth of low-cost funds for lending to housing and infrastructure projects last month, stepping up support for the economy.
Firms listed in mainland China and Hong Kong spent 14 billion yuan and HK$21bil (US$2.6bil) repurchasing shares last month, respectively, each marking a record since 2021 when Bloomberg began compiling the data.
> Securities lending restriction
Securities regulators said they will halt the lending of certain shares for short selling, the latest attempt to put a floor under the stock market rout. Strategic investors, which typically refers to holders with restricted shares, won’t be allowed to lend out the stock during agreed lock-up periods.> Real estate easing
Guangzhou, one of China’s biggest cities, further loosened home-buying curbs in a bid to stem falling prices.
Beijing, Shanghai and Shenzhen have lowered down-payment requirements since November.
The Housing and Urban-Rural Development Ministry said it would provide a list of housing projects eligible for funding support by the end of the month, the latest attempt to boost lending for real estate to slow the sector’s slump.
The same day, the National Financial Regulatory Administration (NFRA) urged banks to support requests by qualified developers including extending existing loans and adjusting repayment arrangements.> RRR cut, property loans
PBoC governor Pan Gongsheng said the central bank would lower the reserve requirement ratio (RRR) – the amount of cash lenders must keep in reserve – by 0.5 percentage points on Feb 5 to release one trillion yuan (US$139bil) in long-term liquidity to the market.
The announcement, coming after official data showed the nation’s economy was still grappling with major challenges, marked the biggest RRR cut since 2021.
Hours later, regulators unveiled more measures, including broadening the use of commercial property loans for developers to help them repay other debt.
The same day, authorities in China and Hong Kong announced steps to deepen financial ties, including facilitating real estate purchases and expanding a programme that allows for personal investments in the Greater Bay Area, a region of 70 million people that includes Hong Kong and megacities in the southern mainland such as Shenzhen and Guangzhou.
> Stock rescue package
Policymakers are considering using about two trillion yuan, mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link, Bloomberg reported.
They have also earmarked at least 300 billion yuan of local funds to invest in onshore shares through China Securities Finance Corp or Central Huijin Investment Ltd. A day earlier, Premier Li Qiang asked authorities to take more “forceful” measures to stabilise the stock market and investor confidence. His request came after the CSI 300 Index touched a five-year low.
The aggregate turnover in some of the country’s top exchange-traded funds – commonly watched for signs of state-led buying – reached the third-largest weekly total ever.
It was the most since July 2015, when the so-called “national team” tried to offset selling momentum amid an epic bubble bursting.
China is considering one trillion yuan of new debt issuance under a so-called special sovereign bond plan, Bloomberg News reported.
The proposal discussed by senior policymakers would involve the sale of ultra-long sovereign bonds to fund projects related to food, energy, supply chains and urbanisation. — Bloomberg
