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China’s state-backed investment funds have injected roughly 60 billion yuan (approximately $8.9 billion) into the stock shares of state-owned enterprises in an effort to stabilize the market after a significant decline driven by a global tech stock correction.
China Reform Holdings and its affiliated entities have invested over 50 billion yuan through special lending channels dedicated to share buybacks and increasing holdings. This includes matching capital injections, recent reports reveal. Additionally, China Chengtong Holdings Group stated that it and its investment affiliates have allocated nearly 10 billion yuan to bolster their investments in listed central SOEs.
The term “national team” refers to a coalition of Chinese financial institutions backed by the government, such as China Reform, China Chengtong, and Central Huijin Investment. These entities actively buy stocks and exchange-traded funds during periods of market stress to support prices and investor confidence.
Both China Reform and China Chengtong emphasized their commitment to continue large-scale share purchases, asserting they will “firmly protect the strategic value of core stock assets and promote stable, healthy growth of the capital markets.” China Chengtong also indicated their future focus will include stocks and ETFs related to central SOEs and technology firms.
Since the beginning of this month, Chinese markets have experienced a sharp decline, mainly due to a global correction in technology stocks. As of July 17, the Shanghai Composite Index and Shenzhen Component Index had fallen by 9.1% and 16.5%, respectively. Meanwhile, the ChiNext and Star Market indexes plunged even further, dropping 22.2% and 24.5%.
Market volatility overseas and increased risk aversion have been primary factors behind the steep fall in China’s stocks this month, according to Li Qiuxu, a senior analyst at China International Capital Corporation.
In response to regulatory calls and measures to stabilize the market, several listed firms announced share repurchase plans over the weekend. Some private equity funds also revealed initiatives to buy back their own holdings.
Lingjun Investment reported that hedge funds and senior managers pledged to spend 200 million yuan (about $29.5 million) over the next two weeks on its private security fund products.
Yesterday, multiple publicly traded companies, including Guolian Minsheng Securities, HuaAn Securities, Olympic Circuit Technology, Jalong Micro-Nano New Materials, Focus Hotmelt, and RemeGen, announced share buyback programs. DR Laser Technology’s Board Secretary, Qiao Dui, announced that he would personally invest over 500,000 yuan (around $73,830) to increase his ownership stake.
Major state-owned listed companies such as Aluminum Corporation of China, CRRC, Three Gorges Renewables Group, SDIC Power Holdings, and China Coal Energy also revealed plans to repurchase shares, led by their controlling government shareholders.
The China Securities Regulatory Commission is scheduled to meet today with representatives from securities firms, fund managers, and listed companies to gather suggestions and proposals aimed at fostering the stable and healthy development of China’s financial markets, according to state media. This move signals an encouraging regulatory effort to soothe market fears.
Research from SDIC Securities recently indicated that after more than two weeks of steep declines, much of the deleveraging pressure in China’s stock market has already been absorbed. Similarly, HuaAn Securities highlighted in their latest report that the recent correction has pushed market valuations into oversold territory.
Furthermore, numerous tech companies listed on the market have projected strong earnings for the first half of the year, providing fundamental support to curb the ongoing downturn.
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