Chinese stocks have struggled to gain traction since returning from the Lunar New Year holiday, increasing pressure on the Chinese government to provide more support and restore confidence in an economy struggling with a real estate slump and stubborn deflation.
The country's benchmark CSI300 index was sluggish in trading this week despite measures to encourage state funds to buy stocks and a cut in the key mortgage reference rate to support the housing market. Optimism has waned since markets rose before the week-long holiday as investors welcomed changes in market regulators and moves to introduce broader trading restrictions.
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China's leaders are looking for ways to put a floor on a $7 trillion stock market decline that risks triggering financial and social instability. They are also looking to inject momentum into the broader economy, which is essential to boosting investor confidence.
Below is a list of measures announced or reported since the beginning of the year.
February 20th:
Major lending rate reductions
Chinese banks have cut the five-year loan prime rate, the main benchmark interest rate for home loans, by 25 basis points, a record high. It's the first higher-than-expected reduction since June, bringing costs down to 3.95%. The move would allow minimum mortgage interest rates for home buyers to be lowered in more areas across the country, including the big cities of Beijing and Shanghai, in a bid to stimulate sluggish housing demand.
February 19th:
Purchase of “National Team” continues
Exchange-traded funds (ETFs) tracking Chinese stocks saw volume spike on the first trading day after the holiday, perhaps a sign that government-backed funds continue to support the market. The so-called varsity helped the CSI 300 rise in afternoon trading after struggling to sustain gains for much of the day.
February 18th:
Prime Minister's New Year's call
Chinese Premier Li Qiang called for “real and strong” action to boost public confidence in the economy. Li said authorities should focus on solving practical problems faced by individuals and businesses ahead of the holidays, adding that they needed to “win the public's trust with real work and results.” .
February 7th:
Top securities regulator changes
In a surprising move, the Chinese government replaced the head of its securities regulator after markets closed for the day. Wu Qing, a banking industry and regulatory veteran who led a crackdown on traders in the mid-2000s and earned a reputation as a “broker dismantler,” will replace Yi Huiman as a member of the China Securities Regulatory Commission, the paper said. He is said to be planning to become the chairman of the party. State-run Xinhua News Agency.
February 6th:
Financial support for developers
In a statement, China's financial regulators called for further rapid implementation of a financing coordination mechanism to support developers at the meeting.
Regulators plan to brief Xi
Regulators are expected to brief President Xi Jinping on the market as soon as Tuesday, Bloomberg News reported. It's unclear whether any new support measures will come out of the meeting with Mr. Xi, but traders are hoping this time will be different.
Sovereign fund pledges support
Central Huijin Investment, which owns Chinese government stocks in major financial institutions, announced it will buy more exchange-traded funds (ETFs). In follow-up comments, the securities regulator pledged to maintain stable market operations, adding that the regulator would continue to guide various institutional investors and funds to enter the market.
M&A/business restructuring support
China strongly supports listed companies to increase their investment value through mergers, acquisitions and restructuring, the China Securities Regulatory Commission said in a statement.
“National team” buys stocks
Goldman Sachs estimates that the so-called national team bought about 70 billion yen ($9.7 billion) in Chinese domestic stocks last month, and would need 200 billion yen ($9.7 billion) to stabilize, about 0.8% of the free market capitalization. He added that he needed yen. market.
The national team refers to a group of Chinese state-run funds tasked with supporting the market. Meanwhile, foreign investors, including overseas agents of these government funds, bought another 1.7 billion yen ($1.7 billion) in mainland stocks through trading links with Hong Kong on Wednesday, the seventh consecutive inflow of funds.
sales restrictions
China is tightening trading restrictions on domestic institutional investors and some offshore sectors as authorities struggle to stem a deepening stock market slide, people familiar with the matter said.
Authorities this week imposed caps on cross-border total return swaps between some brokerages and their customers, restricting channels available to China-based investors to short Hong Kong stocks, the company said. Officials spoke on condition of anonymity to discuss private matters. At the same time, some Chinese brokers using this route to buy mainland stocks for their offshore units have been told not to reduce their positions, the sources said.
February 5th:
financial stimulus
The Chinese government on Monday injected about 1 trillion yen more into the market as a previously announced cut in bank reserve requirements took effect. As a result, there were few signs of stress in the short-term money market, and the country was able to maintain an abundance of cash.
Regulators check in on listed companies
According to an announcement from the China Securities Regulatory Commission, Chinese regulators visited listed companies in 20 provinces and municipalities from January 29 to February 4. Regulators are accelerating the process of resolving issues raised by listed companies regarding tax policy, financing, land, import and export, and intellectual property protection.
Help for home builders
Cash-strapped property developers in China say a series of housing projects have been listed for funding under the latest program to support the struggling sector. The move comes just three weeks after the Chinese government urged local authorities to draw up a list of projects eligible for funding. Policymakers have urged risk-averse banks to step up lending to the real estate sector, but credit growth slowed last quarter to its lowest level in more than a year and developers completed more homes. ability is impaired.
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Commit to addressing margin call risk
Chinese stock traders are rapidly clearing margin debt, highlighting the possibility that the long-term decline in stock prices is leading to forced stock liquidations. In response, securities regulators said they would instruct brokerages to adjust margin call levels and maintain “flexible” liquidation lines to ease pressure from forced sales of pledged shares.
February 4th:
Regulators vow to prevent 'abnormal fluctuations'
The China Securities Regulatory Commission said it would guide more medium- and long-term funds into the market, crack down on illegal activities such as malicious short selling and insider trading, and prevent abnormal fluctuations.
February 1:
PBOC supports housing and infrastructure
The People's Bank of China stepped up its economic support last month, releasing data showing it had provided 150 billion yen worth of low-cost funds to finance housing and infrastructure projects.
Stock buyback
Listed companies in mainland China and Hong Kong spent 14 billion yen and HK$21 billion ($2.6 billion), respectively, on share buybacks last month, the highest amounts since 2021, when Bloomberg began compiling the data.
January 28th:
Securities lending restrictions
Securities regulators announced they would stop lending certain stocks to short sellers, the latest attempt to put an end to the stock market crash. Strategic investors (usually referring to holders of restricted stock) cannot lend out their shares during the agreed lock-up period.
January 27th:
real estate relaxation
Guangzhou, one of China's largest cities, has further eased regulations on home purchases to stem the fall in prices. Beijing, Shanghai, and Shenzhen lowered their down payment requirements starting in November.
January 26th:
Assistance to developers
The Ministry of Housing and Urban and Rural Development has announced that it will publish a list of housing projects eligible for financing support by the end of this month, the latest attempt to expand real estate financing to ease the downturn in the real estate sector. Become.
On the same day, the National Financial Supervisory Administration asked banks to assist eligible developers with their requests, including extending existing loans and adjusting repayment plans.
January 24th:
RRR reduction, real estate loans, etc.
People's Bank of China Governor Ban Gongsheng announced on February 5 that the People's Bank of China will raise the reserve requirement ratio (the amount cash lenders must hold in reserves) to 0.5% as the central bank releases 1 trillion yen of long-term liquidity to the market. He said he would reduce the points. The announcement came after official figures showed the country's economy still faces major challenges, marking the biggest RRR reduction since 2021.
Hours later, regulators announced further measures, including expanding access to commercial real estate loans to help developers pay down other debts.
On the same day, authorities in China and Hong Kong announced financial ties, including promoting real estate purchases and expanding programs to allow individuals to invest in Hong Kong and the Greater Bay Area, a region of 70 million people that includes the Hong Kong megacity. announced measures to deepen this understanding. Southern mainland areas such as Shenzhen and Guangzhou.
January 23rd:
stock relief packages
According to a report by Bloomberg, policymakers are considering using about 2 trillion yen, mainly from offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund to buy onshore stocks through a Hong Kong exchange link. It was reported that It also secured at least 300 billion yen of local funds to invest in domestic stocks through China Securities Finance Corporation (Central Huijin Investment). A day earlier, Premier Li Qiang urged authorities to take “stronger” measures to stabilize the stock market and investor confidence. His request came after the CSI300 index hit a five-year low.
January 19th:
Signs of state takeover
The total trading volume of some of Japan's top exchange-traded funds (ETFs), which are closely watched for signs of government-led purchases, reached the third largest weekly volume on record. This was the highest amount since July 2015, when the national team was trying to offset a sell-off during the epic bubble burst.
January 16th:
special bond
China is considering issuing 1 trillion yen in new government bonds under a so-called special sovereign bond plan, Bloomberg News reported. Proposals discussed by senior policymakers include selling very long-term sovereign debt to finance projects related to food, energy, supply chains and urbanization.
January 5th:
rental housing
The People's Bank of China and NFRA have released guidelines on financial support for the development of the rental housing market. This includes encouraging banks to provide financing to developers, industrial zones, and certain local organizations and businesses to build new housing for long-term rental or to renovate existing properties for that purpose. It included policy.
© 2024 Bloomberg
