China has launched new funding schemes worth $112 billion to support the nation’s stock market. The People’s Bank of China (PBOC) announced the initiatives, which include a swap scheme and a relending scheme. The swap scheme will make it easier for brokerages, asset managers, and insurers to buy stocks.
China GDP Q3: Economy expands at 4.6%; Shanghai, Hong Kong markets rise https://t.co/8u5pd75ig6
— ET NOW (@ETNOWlive) October 18, 2024
This could help stabilize or boost market prices. The relending scheme provides low-interest loans for share buybacks and stock purchases. This makes it more affordable for companies to support their own stock prices.
??China’s economic expansion slowed in Q3, underscoring the need for additional stimulus to reach 5% growth target
?GDP +4.6% y/y in Q3: weakest in 6 quarters
✅ Retail sales +3.2% y/y in Sep
✅Industrial production +5.4% y/y in Sep
▶️Unemployment 5.1%https://t.co/WYE7f0Mb93— Gregory Daco (@GregDaco) October 18, 2024
The central bank’s efforts are seen as important measures to provide liquidity and reassure investors. China’s economy is facing ongoing challenges. In response to the announcement, China International Capital Corporation (CICC) confirmed it will actively implement the government’s mandates.
The market is up nearly 4%.
Bloomberg: "The People’s Bank of China disclosed more details of its measures to boost capital markets minutes after authorities released figures showing China’s slowdown deepened in the third quarter."https://t.co/0inzwGbUkb via @economics
— Michael Pettis (@michaelxpettis) October 18, 2024
CICC plans to promptly engage in safeguarding activities related to the swap facility.
https://twitter.com/DrJStrategy/status/1847230303133147515
China launches $112 billion stock boost
The company also intends to apply for participation in the first batch of business operations within this facility.
CICC’s stock price saw a significant increase of 11.639% following the news. The short selling recorded $142.37 million, with a ratio of 8.753%. The PBOC’s new initiative aims to streamline and enhance the financial sector’s infrastructure.
The Securities, Funds and Insurance Companies Swap Facility (SFISF) is part of broader measures to boost economic stability and growth. The announcement has caused notable activity in the financial markets. This indicates positive investor sentiment towards the initiative.
CICC is among the leading financial institutions expected to drive the adoption and effective utilization of the SFISF. The initial round of the new tools involves 300 billion yuan in reloans at a 1.75% interest rate. So far, 20 institutions have been cleared for participation.
Following the launch, major stock indexes rallied 2.9%, supported by strong third-quarter economic data.
