Monday’s session in mainland China and Hong Kong is the first chance for equities to react to the reports, and the prospect of state-backed support may help sentiment at the open after October’s heavy selling. Whether that lasts is likely to depend on detail. Traders have already seen last month’s measures fail to halt the slide, so the scale and terms of any expanded relending facility will matter more than the signal alone. A credible support package could also ease some pressure on the yuan and on broader Asian risk appetite. Without concrete steps, the combination of contracting PMIs and doubts over AI earnings leaves the downside case in place.
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After a record losing streak in Chinese stocks, Beijing appears to be reaching for more support tools, though last month showed that a signal on its own is not enough. Info via Bloomberg (gated).
Summary:
The People’s Bank of China will meet the financial and securities regulators and major banks on Monday to discuss market support tools, Chinese media reported
The talks are expected to focus on improving a relending programme that funds share buybacks and stake increases
Some securities firms and funds have received notice of the meeting, and industry participants see it as groundwork for further stabilisation steps
The CSI 300 fell 8.5% in October into a bear market, a record 12th straight weekly decline and the worst month in more than a decade
Measures announced last month have not stemmed losses, amid a weak economy, doubts over AI earnings, and October PMIs back in contraction
China’s central bank is set to meet the country’s financial regulators and major banks on Monday to discuss tools aimed at supporting the stock market, according to Chinese media reports, as authorities face mounting pressure to halt a steep slide in equities.
The People’s Bank of China will hold talks with the National Financial Regulatory Administration, the China Securities Regulatory Commission and leading banks to study how to improve a relending programme for share buybacks and stake increases, financial news outlet Cailian reported on Sunday, citing people in the industry. The scheme lets companies and major shareholders draw on bank lending, backed by central bank funding, to buy their own shares.
The 21st Century Business Herald reported that some securities firms and funds had been notified of the meeting. The newspaper said people in the industry were speculating that the talks were likely preparation by regulators for further action to stabilise the market. There has been no official confirmation of the meeting’s agenda or any planned measures.
A new state-backed push would add to steps taken last month to steady the equity market. Those efforts have so far failed to turn sentiment, as a weak domestic economy and doubts over earnings from artificial intelligence weigh on investors. The CSI 300 index of major Shanghai and Shenzhen stocks fell 8.5% in October, entering a bear market. It was a record 12th straight week of declines and the worst month for Chinese stocks in more than a decade.
The sell-off has coincided with new signs of economic strain. Official purchasing managers’ indexes released on Saturday showed manufacturing and non-manufacturing activity both slipped back into contraction in October, with the factory gauge falling to 49.3 and the non-manufacturing index to 49.7.
The outcome of Monday’s meeting will be watched closely for signs of the scale and speed of any new support. A meaningful expansion of the relending programme would signal that Beijing is prepared to put more firepower behind the market. A meeting that produces only incremental tweaks risks repeating last month’s experience, when policy steps did not reverse the downturn.
This article was written by Eamonn Sheridan at investinglive.com.
