China is contemplating a stock stabilization fund while injecting at least 800 billion yuan (approximately $113 billion) into its struggling equity market. This initiative comes as the People’s Bank of China (PBOC) establishes a swap facility to provide liquidity to securities firms, funds, and insurance companies for purchasing equities.
The plan includes a 500 billion yuan swap facility and a 300 billion yuan re-lending facility, aimed at enabling listed companies and major shareholders to buy back shares. The CSI 300 Index, a benchmark for onshore Chinese stocks, surged 4.3%, marking its best performance since July 2020. Similarly, Hong Kong stocks jumped over 5% intraday.
PBOC Governor Pan Gongsheng emphasized that this liquidity support is intended to stabilize the stock market, which has been under pressure due to ongoing economic challenges. Analysts view this as a significant commitment to boosting investor sentiment, although some remain skeptical about its long-term effectiveness given past rescue efforts.
China’s recent measures also include cutting banks’ reserve requirements and reducing a key policy rate to support economic growth. Despite these efforts, the CSI 300 Index has struggled, down more than 2% in 2024, leading to a significant loss in market value since its peak in 2021.
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