China pushes listed companies and investors to buy stocks to stabilize the market

A Chinese national flag flies in front of the China Securities Regulatory Commission (CSRC) building on Financial Street in Beijing, China July 9, 2021. REUTERS/Tingshu Wang

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HONG KONG, April 12 (Reuters) – China is encouraging long-term investors to buy more shares and major shareholders of listed companies to increase their holdings as shares tumble, in a bid to stabilize a shaken stock market by the worsening of the COVID-19 epidemic. .

The government will also facilitate corporate financing in COVID-hit areas and urge public shareholders of listed companies to actively buy undervalued shares, the country’s securities watchdog said in a statement on Monday. its website.

China’s benchmark CSI300 (.CSI300) fell 3.1% on Monday, the biggest drop in a month, as a lockdown in Shanghai and other parts of the country threatens economic growth.

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The market plunged further on Tuesday morning to a nearly four-week low, taking this year’s loss to 17%, as investors seemed oblivious to the authorities’ move.

Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, said raising capital, especially public money, into Chinese stocks no longer made sense.

“There are still a lot of structural bubbles and risks in this market, which is also facing huge external uncertainty,” he said, citing the risk of capital outflows, fallout from the Ukraine crisis and rising geopolitical tensions.

The China Securities Regulatory Commission (CSRC) said in a statement on Monday that authorities would take steps to stabilize the expectations of listed companies and investors.

China will encourage social security funds, pension funds, insurers, trust companies and wealth management companies to allocate more money to equity assets and invest more in quality listed companies, it said. added the CSRC.

The government will also improve the financing mechanism for private enterprises and support fundraising, acquisitions and corporate restructurings in areas hit hard by COVID.

INCREASE CONFIDENCE

To boost investor confidence, the CSRC said it will encourage listed companies to buy back their shares to stabilize prices. Major shareholders and senior executives are also encouraged to actively buy stocks when prices fall sharply.

Meanwhile, state shareholders should actively buy undervalued shares and support share buyback and cash dividend plans by listed companies, according to the statement jointly issued by the CSRC, the asset supervisor. of the Chinese State, and the All-China Federation of Industry. and Trade.

China is also stepping up its efforts to woo foreign investors, amid signs of capital outflows.

The Shanghai Stock Exchange said late Monday that it had held a virtual tour with nearly 200 representatives of global investors, including sovereign wealth funds and pension funds, to promote index investing following China.

The promotion came after data from the Institute of International Finance (IIF) showed outflows of $6.3 billion from Chinese stocks in March and $11.2 billion from Chinese bonds.

“Investor sentiment toward Chinese equities remains negative amid elevated regulatory risk and concern that the asset class may provide limited hedge against the risk of stagflation,” Manulife Investment Management said in a note Tuesday.

The portfolio manager expects growth to slow in China, citing challenges such as the rising economic costs of zero-COVID policies, which are dampening consumption.

Also citing the “substantial” costs of China’s strategy to fight COVID, Nomura said late Monday that China faces a growing risk of recession.

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Reporting by Meg Shen and Ella Cao; Editing by Hugh Lawson, Himani Sarkar and Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

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