Business

Chinese markets jump as state investment fund pledges to buy more shares

Regulator has promised to clamp down on what it describes as market manipulation and ‘malicious short-selling’

Hong Kong and mainland Chinese equities have lost €6.5 trillion in value since 2021 amid worsening economic news. Photograph: Chinatopix via AP

Denis Staunton
Tue Feb 6 2024 - 16:27

Chinese shares surged on Tuesday amid signs of Beijing’s determination to arrest a massive sell-off that saw the country’s main indexes fall to five-year lows. The rally followed a promise by a state investment fund to buy more share index funds and a statement by the country’s security regulator saying that other institutional investors should follow suit.

The Shanghai Composite index rose 3.2 per cent in its biggest daily gain for almost two years while the CSI 300 jumped 3.5 per cent, its largest gain in a single day since November 2022. Hong Kong’s Hang Seng index gained 4 per cent, with shares in ecommerce giants JD.com and Alibaba almost 8 per cent higher.

Central Huijin Investment, a unit of China’s €1.15 trillion sovereign wealth fund, said on Tuesday that it had recently bought index-based exchange-traded funds and would buy more to stabilise the market. The China Securities Regulatory Commission (CSRC) said in a statement that Huijin’s actions recognised that China’s onshore market, known as the A-share market, was undervalued.

[ China’s population fell by more than two million last year ]

“The valuation of the A-share market is now at historical lows and its medium and long-term investment values stand out,” the CSRC said in a statement.

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“That has been fully acknowledged by institutional investors including Huijin. We unswervingly support Huijin for continuing more investments and will facilitate its entry by creating more favourable and smooth channels.”

The regulator has promised to clamp down on what it described as market manipulation and “malicious short-selling” and on Tuesday it banned brokerages borrowing shares from institutional investors for short-selling. Bloomberg reported on Tuesday that Xi Jinping will discuss the markets with regulators, news that helped to boost sentiment.

Goldman Sachs estimates that Chinese state-owned investors have spent more than €9 billion buying shares in the A-share market over the past month but that it will take three times that sum to stabilise the market. Hong Kong and mainland Chinese equities have lost €6.5 trillion in value since 2021 amid worsening economic news.

[ China’s economic data shows patchy recovery, fueling stimulus calls ]

[ World entering ‘new period of turbulence and transformation’, China’s premier warns ]

The crisis in China’s property market, which has driven some of the country’s biggest developers to the edge of bankruptcy, continues to depress consumer confidence. And the expected rebound following the lifting of coronavirus restrictions at the end of 2022 was weaker and more short-lived than expected.

Markets will close for a week for Chinese New Year later this week and Beijing’s commerce ministry said on Tuesday that it would introduce a raft of measures to boost consumer spending after the holiday. These will target the purchase of cars and household appliances and encourage the renovation of older homes.

“Automobiles, household appliances and home furnishing are the focus of traditional consumption and are closely related to people’s lives,” vice minister of commerce Sheng Qiuping told reporters.

Denis Staunton

Denis Staunton

Denis Staunton is China Correspondent of The Irish Times

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