Beijing’s liquidity support for the stock market will come in the form of a 500 billion yuan swap facility and a 300 billion yuan re-lending facility. Pan said authorities may add another 500 billion yuan in phases.
“This is probably the most aggressive sentiment booster that the PBOC and market regulators can introduce before the US election,” said Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd. “The overall packaging of these measures was done quite well, with helpful guidance for more easing down the road.”
The swap facilities will enable eligible securities firms, funds and insurance companies will be allowed to use their holdings of bonds, stock ETFs, CSI 300 constituent stocks and other assets as collateral to obtain high-liquid assets such as government bonds and central bank bills from the PBOC
The swap for more liquid assets “will significantly increase institutions’ ability to acquire funds and buy stocks,” Pan said.
Funds obtained through this instrument can only be used to invest in the stock market, he added.
The re-lending facility is aimed at guiding commercial banks to provide loans to listed companies and major shareholders for the purpose of buying back or increasing their holdings of shares of listed companies
This tool is applicable to listed companies with different ownerships such as state-owned enterprises, private enterprises as well as mixed ownership enterprises
Beijing has been weighing the formation of a state-backed stabilisation fund since at least October, although some investors doubt it’ll be effective given that previous rescue efforts had limited impact. Sentiment remains depressed as a result of China’s long-running property crisis, weak consumer sentiment and falling prices.
State funds have purchased over US$80 billion worth of onshore exchange-traded funds so far in 2024, according to estimates by Bloomberg Intelligence, in an attempt to prop