China to expand use of stock support tools to stabilise market
The People’s Bank of China will lower swap fees and reduce relending rates to bolster investor confidence.
The People’s Bank of China (PBOC) announced on Monday that it will promote the use of two stock support tools and refine their terms to improve market stability. According to a report by Mint, the central bank intends to conduct operations under its swap facility for insurers, funds, and securities firms when appropriate.
The PBOC said it will increase the number of institutions using the swap facility and moderately reduce swap fees. Additionally, the central bank will cut the rate on its relending facility for stake increases and share buybacks from 1.25 per cent to 1 per cent, making the programme permanent.
The China Securities Regulatory Commission (CSRC) stated that a third round of swap operations will start in the coming days. Currently, 31 securities and fund firms have been approved to participate, with applications for more than 100 billion yuan in quotas.
The CSRC also plans to relax rules for share buybacks, such as allowing companies to repurchase shares if they fall below the IPO price. The regulator is studying changes to margin-financing requirements to improve liquidity and increase financing capacity.
The measures come as Chinese shares have faced a slump since the summer. The CSI 300 Index fell 8.5 per cent in October, marking its worst monthly decline in over a decade.
The PBOC noted that about 440 billion yuan of loans for buybacks and stake increases have been contracted, with over 280 billion yuan disbursed. The outstanding balance of the swap facility stands at 105 billion yuan.
