The CSRC’s decision to convene market participants for a stability meeting, alongside roughly 110 billion yuan already deployed by two state-owned investment firms, signals Beijing is treating the recent selloff as a policy priority rather than a routine correction. Monday’s higher open across the Shanghai Composite, Shenzhen Composite, CSI 300, ChiNext and STAR 50 suggests the intervention is providing at least a near-term floor, with the STAR Market’s tech-heavy names, down roughly 25% from their July 1 peak, likely to see the most direct benefit from state buying given their outsized share of recent losses. Whether the bounce holds will depend on whether the underlying drivers, liquidity concerns tied to CXMT’s large IPO, the global chip stock selloff, and renewed Middle East conflict, continue to weigh on sentiment, or whether state support and the promise of further policy measures are enough to draw private capital back in. For now, the meeting itself, alongside explicit pledges of further buying from state investors, points to Beijing prioritising market stability over allowing the correction to run its course.
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Beijing is throwing state money and a stability meeting at a two-week rout that erased 10 trillion yuan.
Summary:
- China’s securities regulator will meet market participants on Monday to discuss market stability, according to Reuters, as state-backed investors bought shares to stem a rapid slide in prices
- The rout wiped out 10 trillion yuan, or about $1.48 trillion, of China market capitalisation over the past two weeks
- Two state-owned firms said over the weekend they had deployed roughly 60 billion yuan combined to buy stocks, with the CSRC inviting brokerages, fund managers and listed companies to seminars to gather proposals for stabilising the market
- China’s stock market fell more than 5% last week as chipmaker CXMT’s $8.6 billion IPO stirred liquidity concerns, alongside a global chip stock selloff and renewed Middle East conflict
- Shanghai’s STAR Market plunged roughly 25% from its July 1 peak, with selling especially severe in tech stocks
- China Reform Holdings Corp said it had spent 50 billion yuan buying stocks and would keep increasing its equity holdings, while China Chengtong Holdings Group said it had added nearly 10 billion yuan in stock purchases
- Chinese indices opened higher on Monday, with the Shanghai Composite up 0.7%, the Shenzhen Composite up 1.2%, the CSI 300 up 1%, ChiNext up 2.2%
China’s securities regulator will meet market participants on Monday to discuss market stability, official media reported, as state-backed investors moved to buy shares and stem a rapid slide in Chinese equities. The gathering follows a rout that wiped out 10 trillion yuan, or roughly $1.48 trillion, of market capitalisation over the past two weeks, prompting two state-owned firms to say over the weekend that they had already deployed about 60 billion yuan combined to buy stocks.
The China Securities Regulatory Commission has invited market participants to Monday’s meeting to hear proposals on promoting stable and healthy market development, the official Securities Times reported, according to Reuters. The regulator will also hold seminars in the coming days with representatives from brokerages, fund management firms and listed companies to gather input for policymaking aimed at stabilising the market, the China Securities Journal said.
The intervention follows a bruising week in which China’s stock market fell more than 5%, as chipmaker CXMT’s $8.6 billion initial public offering stirred liquidity concerns, compounded by a global selloff in chip stocks and renewed conflict in the Middle East that dampened broader risk appetite. Selling was especially severe in technology names, with Shanghai’s STAR Market plunging roughly 25% from its July 1 peak.
State investors moved quickly to respond. China Reform Holdings Corp, owned by the central government, said late on Sunday it had spent 50 billion yuan buying stocks to help stabilise the market and would continue increasing its equity holdings, saying it remains confident in the outlook for China’s capital markets and will keep backing tech innovation and state-owned company growth. China Chengtong Holdings Group said separately it had added nearly 10 billion yuan in stock purchases, vowing to help “maintain capital markets stability with full force.”
The state buying appeared to support a rebound at Monday’s open, with the Shanghai Composite up 0.73%, the Shenzhen Composite up 1.18%, the CSI 300 up 1.03%, ChiNext up 2.20% and the STAR 50 up 2.87%, though the durability of the recovery will likely hinge on whether the underlying pressures on tech valuations and broader risk appetite continue to ease.
This article was written by Eamonn Sheridan at investinglive.com.