China urged some of the country’s biggest investors to buy more stocks, stepping up efforts to stem the market’s slide toward a two-year low.
The China Securities Regulatory Commission issued the guidance on Thursday at a meeting with investors including the country’s giant social security fund, just as the benchmark CSI 300 Index was sliding toward its lowest level since June 2020.
The gauge did not change much yesterday after erasing a drop of as much as 1.1 percent.
Photo: Reuters
Chinese equities have lost about US$2.7 trillion of market value this year as the nation’s strict COVID-19 policies, corporate crackdowns and slowing economic growth spooked investors.
While a government committee led by Chinese Vice Premier Liu He (劉鶴) issued a sweeping set of policy promises to stabilize markets in mid-March, investors have so far been disappointed by a lack of follow-through.
“For a turnaround in sentiment, we need to see something sincere from policymakers, either a lot of extra liquidity, a major shift in the Shanghai situation, or a massive surprise that will breathe some new hope into the market,” Beijing Axe Asset Management Co fund manager Wang Yugang said.
“Even in a critical year like this, a robust stock market has quite a low priority because currently there’s no systemic risk,” he said.
The meeting was followed by a series of articles in state media projecting confidence in the economy and markets. The efforts underscore growing pressure on authorities to boost confidence before a closely watched leadership meeting that is expected to confirm a precedent-breaking third term for Chinese President Xi Jinping (習近平).
Other Chinese assets have also been under pressure. The onshore yuan is on track for its biggest weekly loss since August 2019, as concerns mount about slowing economic growth amid COVID-19 lockdowns.
The People’s Bank of China “is looking to provide further support for the economy, and seems intent on pulling as many levers as possible, perhaps with the exception of lowering interest rates for now,” said Khoon Goh (吳昆), head of Asia research at Australia & New Zealand Banking Group Ltd. “Allowing the yuan to weaken slightly this week seems to be part of the overall ‘support package.’”
The nation’s high-yield dollar bonds also declined for a second straight week in the worst such stretch since mid-March. That pares an initial bounce that securities received from Beijing’s promises, as investor patience for more details wears thin.
In a sign of broader concerns, higher-rated developers such as Country Garden Holdings Co (碧桂園) have posted some of this week’s largest declines. Any renewed rally ahead might only be sustained if concrete and significant policy steps are taken rapidly, said Jean-Louis Nakamura, chief investment officer for the Asia-Pacific region at Lombard Odier.
This is not the first time authorities have urged institutional investors to increase positions. A similar call was issued less than two weeks ago following a request made in October 2019.
With no end to tight COVID-19 restrictions in sight, overseas investors pulled a net 5.6 billion yuan (US$862.36 million) from Chinese shares this month after offloading 45 billion yuan last month, the largest outflow in nearly two years. Global funds slashed their holdings of Chinese bonds by the most on record in March.
Authorities have shown little alarm about the withdrawals.
“Obviously, Beijing wants to stem the bearish sentiment about both the economy and the stock market, but the economy is like a giant ship, and it takes time for it to turn around,” Core Pacific Yamaichi head of research Castor Pang (彭偉新) said. “Even if Beijing wants to talk up the market, it’s hard to change how investors are thinking.”
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