BEIJING/SHANGHAI – China’s central bank on Oct 18 moved to support markets just as data showed the economy expanding the least in six quarters, signalling the government’s intent to continue a stimulus push to draw a line under the slowdown.
The People’s Bank of China (PBOC) kicked off two funding schemes that will initially pump 800 billion yuan (S$148 billion) into the stock market through newly created monetary policy tools.
The benchmark CSI 300 Index of onshore stocks rebounded from earlier losses to gain as much as 3.7 per cent. A gauge of Chinese stocks listed in Hong Kong also rose more than 3 per cent.
PBOC spelt out operational details of the swap and relending schemes first announced in late September, aiming to support “steady development” of capital markets.
China’s recent market bull run has been losing steam as euphoria turned into caution over the size and implementation of Beijing’s stimulus promises.
Under the swap scheme, initially worth 500 billion yuan, brokerages, funds management firms and insurers can obtain liquidity from the central bank through asset collateralisation to buy stocks.
Currently, 20 companies have been approved to participate in the scheme and initial applications have exceeded 200 billion yuan, PBOC said.
The central bank also launched a relending programme, initially worth 300 billion yuan, that would allow financial institutions to borrow from PBOC to fund share purchases by listed companies or their major shareholders.
The one-year interest rate for relending is set at 1.75 per cent, and 21 eligible financial institutions can apply for the loans at the start of each quarter, PBOC said.
The announcements came after China’s financial regulators held a meeting with key financial institutions, urging them to swiftly implement expansive policies to support the economy and capital markets. REUTERS, BLOOMBERG