More firms buy back shares as Beijing seeks to stabilize mart

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SHANGHAI- More than 30 Chinese listed companies unveiled share buyback and purchase plans over the weekend while major mutual fund house E Fund Management Co said it would invest in its own product as Beijing steps up efforts to put a floor under a sliding stock market.

China has already announced a slew of measures, including share purchases by state fund Central Huijin, to stem declines in a stock market that last week hit the lowest level since 2019.

Amid government calls to revive the market, more than 20 listed companies, including Hainan Mining Co Vatti Corp and Zhejiang Sanmei Chemical unveiled share buyback plans or proposals late on Sunday.

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In addition, companies such as CRRC Corp and Wuxi Lead Intelligent Equipment disclosed share purchase plans by their controlling shareholders.

Separately, E Fund Management said it would use 200 million yuan ($27.34 million) of its own money to buy its own product, E Fund CSI 300 ETF while slashing fees on a slew of exchange traded products.

Central Huijin started buying ETFs last Monday to help prop up the market, and the state fund has since bought more than 17 billion yuan worth of ETFs, official Shanghai Securities News estimates.

Investors are making a tentative return to China’s beaten-down stock markets as the government opened the stimulus taps, including pressing a national fund for support, but they remain mindful the economy and sentiment are still fragile.

China’s benchmark CSI300 Index  staged a moderate rebound from 4-1/2-year lows last week, after state fund Central Huijin Investment started buying exchange-traded funds (ETFs) on Monday, adding substance to the central bank’s pledge  to fend off financial risks.

Investors were also excited by Tuesday’s approval of an additional 1 trillion yuan ($136.76 billion) of sovereign bond issuance.

Drawing investors back into China’s $10.5 trillion stock market, particularly the foreign buyers that have fled in droves this year, would stem further slides in a market which fell to its lowest since 2019 earlier this week.

The policy efforts could also halt capital outflows and ease the yuan’s depreciation and a stronger market could help fund a rejuvenation of the world’s second-largest economy.

The fiscal stimulus “is injecting some confidence to an extremely pessimistic market that saw no hope in the economy,” said Huang Yan, fund manager of Shanghai QiuYang Capital Co.

QiuYang added some positions this week for short-term bets, but remained defensive as “the market needs time to find bottom”, Huang said.

Still, the rebound in China stocks was modest and trading remained thin, underlining Beijing’s challenge in reviving confidence dented by a stop-go economic recovery, a deepening property crisis, and heightened geopolitical tensions.

Huang is also wary of another selloff since further falls in stock prices could force leveraged investors to sell when they face margin calls.

The CSI300 index is down 18 percent from its peak this year in January while China’s currency is down nearly 6 percent so far in 2023.

This weekend the government gave a clear sign of market support when People’s Bank of China Governor Pan Gongsheng said China would prevent risk contagion in the stock, bond and foreign exchange markets, and ensure stability.

“China’s central government is endorsing the stock market,” said Qi Wang, chief investment officer of UOB Kay Hian’s wealth management division in Hong Kong.

“We see tactical opportunities” over the next few months, he said, citing some improvements in China’s economy, the Sino-U.S. relationship, and fresh stimulus. But “I dare not say we are already at the bottom.”

Enlisting Huijin underscored the Chinese government’s seriousness about propping up the market after earlier piecemeal measures such as a cut in the stamp duty, reductions in trading fees, short-selling restrictions and curbs on share sales by listed companies’ large shareholders.

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China Asset Management Co (AMC) said Huijin bought an estimated 10 billion yuan ($1.37 billion) of ETFs on Monday, and continuous buying would “effectively ease liquidity shortage and help stabilise markets.”

Huijin last bought ETFs during the 2015 stock market crash, and during the money market liquidity crunch in 2013. “The Shanghai stock indices were higher by more than 20 percent in three months both times”, analysts at Singapore’s United Overseas Bank wrote.

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