A-share market rallies amid backing from State fund

陈小将

Recent actions by China's securities regulator and the country's "national team" of State-linked investors aimed at safeguarding market stability are expected to calm investor anxieties and lift market confidence, analysts said on Tuesday.

The new moves underscore the regulatory emphasis on safeguarding the stable operation of the capital market and protecting investors' interests, showcasing the government's strong willingness to take concrete action to uphold market order, according to analysts.

They said the country's equity asset valuations are near all-time lows, and that the capital market will likely gradually recover with a number of government measures taking effect, adding that more efforts are needed to further settle investors' nerves and stabilize expectations.

Central Huijin Investment Ltd, an arm of China's sovereign wealth fund, announced on Tuesday that it had expanded purchases of exchange-traded funds, and it will continue increasing the scale of its ETF holdings.

Liu Chunsheng, an associate professor of international trade at the Central University of Finance and Economics, said, "Against the backdrop of a subdued A-share market which fails to reflect the performance of listed companies and does not fully represent the performance of the Chinese economy, the entry of the State-backed investors is not only necessary but also timely, as it will help to stabilize the market and boost market confidence."

Chinese equities rallied on Tuesday amid a slew of policy announcements aimed at shoring up market routs.

The benchmark Shanghai Composite Index climbed to 2,789.49 points at the end of the trading day, rising 3.23 percent, while the Shenzhen Component Index surged 6.22 percent, and the tech-focused ChiNext in Shenzhen closed 6.71 percent higher.

On Tuesday, the China Securities Regulatory Commission said it will continue to coordinate and guide various institutional investors to enter the market more vigorously. It will encourage and support listed companies to step up share buybacks and holdings, and introduce more incremental funds into the A-share market.

The CSRC also warned on Monday against malicious short-selling, to effectively safeguard the stable operation of the market.

"The announcements clearly express the country's determination to maintain the stable operation of the A-share market," said Wang Peng, a researcher at the Beijing Academy of Social Sciences. "Central Huijin's move demonstrates its recognition of the long-term investment value of the A-share market, while the CSRC's decision to guide institutional investors to increase investment and encourage companies to step up share buybacks will inject more liquidity into the A-share market."

Citing the recent statement by the CSRC against malicious short-selling, Bai Wenxi, vice-chairman of the China Enterprise Capital Union, said it highlighted regulators' zero-tolerance attitude toward market violations, which will help to maintain fair market order.

"China's economy is on track for a steady recovery this year, and the recent government moves will help stabilize market expectations and promote steady growth," he said.

"More efforts are needed to further boost confidence and bolster the economy, including intensifying structural reforms and continuously implementing prudent monetary policies to maintain a proper and adequate level of liquidity supply."

Zhang Xia, chief strategist at China Merchants Securities, said he believed that the A-share market's recent drastic fluctuations are coming to an end. The liquidity stress is likely to end around Spring Festival and the A-share market is expected to bottom out in February.