China will encourage financial institutions to make fuller use of two stock support tools and optimize their terms, as authorities step up efforts to bolster market stability and confidence. The People's Bank of China said it will conduct operations under its swap facility for securities firms, funds and insurers when appropriate, increase the number of participating institutions and moderately lower swap fees.
Separately, the PBOC will cut the rate on its relending facility for share buybacks and stake increases to 1% from 1.25%, make the program permanent and encourage banks to increase lending. The two tools were introduced in October 2024 as Beijing sought to shore up the stock market. The relending facility provides low-cost central bank funding to banks for loans financing share buybacks and stake increases by listed companies and major shareholders.
The China Securities Regulatory Commission said a third round of swap operations will begin in coming days, with 31 securities and fund firms approved to participate and applying for more than 100 billion yuan of quotas. The regulator also plans to broaden the relending program, encouraging more major index constituents and leading technology companies to participate. It will ease share buyback rules, including allowing companies to repurchase shares when their stock falls below the IPO price, and will study changes to margin-financing requirements to improve market liquidity.
Chinese shares have been mired in a slump since the summer amid a weak economy and doubts over AI earnings. The CSI 300 Index fell 8.5% in October, its worst monthly decline in more than a decade, and dropped for a record 12 straight weeks through Friday. About 440 billion yuan ($66.2 billion) of loans supporting share buybacks and stake increases have been contracted, according to the central bank.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing