A Chinese state investment fund promised to expand its purchases of stock index funds, among other moves signaling Beijing’s resolve to stabilize markets that have been sagging under heavy selling pressure from a property crisis and slowing economy.
Shares in Shanghai and Hong Kong surged yesterday after the announcement by Central Huijin Investment, whose subsidiaries include Chinese state-owned banks. The gains accelerated after a report by Bloomberg said Chinese President Xi Jinping would meet with market regulators.
The report, citing 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 buying of shares in state-run banks and other companies to counter heavy selling pressure in the Chinese markets, which have been trading at five-year lows. However, Hong Kong’s biggest gains yesterday were in technology companies like e-commerce giants Alibaba, which surged 7.6%, and JD.com, which added 7.8%.
The Shanghai Composite index jumped 3.2% and Hong Kong’s Hang Seng surged 4%. The Shenzhen A-Share index was 5.2% higher.
Benchmarks recovered all or most of their losses for the month, but remain far below their levels of a year earlier.
Over the weekend, the market watchdog warned it would crack down on market manipulation, insider trading and other abuses and promised to protect smaller investors who usually account for the majority of trading in Chinese markets.
Benchmarks in Shanghai and the smaller market in Shenzhen bounced between small gains and big losses on Monday, while share prices of state-run banks and other big companies rose.
The China Securities Regulatory Commission welcomed yesterday’s announcement by Central Huijin, saying that the “historically low level” of share prices highlighted their medium and long-term investment value.
“We firmly support Central Huijin to continue to increase the scale and intensity of its holdings, and will create more convenient conditions and smoother channels for its market entry operations,” it said at a statement. It promised to “make every effort to maintain the stable operation of the market.”
It said it also would facilitate share purchases by institutional investors such as public funds, private equity funds, securities companies, social security funds, insurance institutions, and annuity funds and encourage companies to increase share repurchases.
In a separate notice, the CSRC urged companies to step up mergers and acquisitions and restructuring to enhance the value of listed companies to “strengthen a sense of gains among investors.”
“A large number of listed companies have improved quality, efficiency, and become better and stronger through mergers, acquisitions and reorganizations,” it said.
It was unclear if such moves will suffice to turn the tide that has rattled the markets despite a flurry of moves to instill confidence and support property developers whose financial woes after the government cracked down on excessive borrowing have been a major drag on the economy.
In other developments, a commerce ministry official announced measures to encourage people to renovate their homes, buy appliances and to trade in their cars and buy new ones.
“Automobiles, household appliances and home furnishing are the focus of traditional consumption and are closely related to people’s lives,” the official Xinhua News Agency cited Sheng Qiuping, a vice minister of commerce, as saying. ELAINE KURTENBACH, BANGKOK, MDT/AP