Central Huijin Investment said it will continue to increase holdings of exchange-traded funds, adding to signs that China's authorities are stepping up efforts to revive the struggling stock market.
Stocks rallied, offering a reprieve to investors who have had to grapple with wild market swings over the past two sessions. The onshore benchmark CSI 300 index climbed more than 2%. Small-cap stocks, which have led the recent selloff, also rebounded, with the CSI 1000 index up 2%.
The China Securities Regulatory Commission said soon after Huijin's announcement that it will continue to guide other long-term funds to enter the market with greater intensity, while supporting listed companies to increase repurchases. These efforts come after the CSI 300 sank to a five-year low in chaotic trading on Feb. 2.
The securities watchdog also vowed this week to punish those behind "malicious short selling" and to stop illegal behavior that hinders stable stock market operations and hurts investors. Authorities are also seeking to address risks stemming from margin calls and share pledges.
A more proactive stance from regulators is drawing comparisons with the steps taken during the 2015 rout, when they curbed speculative trading, targeted market manipulation and guided some investors to avoid stock sales.
"Huijin's announcement will guide and encourage more funds to buy and also confirms the market speculation on more state buying recently," said Zhou Nan, investment director at Long Hui Fund Management. "There's very limited room for further slide but the market may continue to fluctuate before the bottom can be solidified."
Buying by state-backed funds had been keenly watched by investors as the selloff deepened this year. The total amount of inflows into a handful of ETFs tracking key gauges rose to a record in January and was more than five times the aggregate amount seen in July 2015, when the so-called "national team" jumped in to stem a rout.
This is the first time since October that Central Huijin, a unit of the $1.4 trillion wealth fund China Investment Corp., said it is buying more ETFs. The most-purchased ETFs year to date include large-cap focused ones such as the Huatai-Pinebridge CSI 300 and E Fund CSI 300, as well as the E Fund ChiNext Price Index ETF and the ChinaAMC CSI Science and Technology Innovation Board 50 ETF.
China is also tightening trading restrictions on domestic institutional investors as well as some offshore units, Bloomberg News reported, as policymakers look to stem a rout that's seen the CSI 300 tumble more than 40% from a February 2021 peak.
The so-called National Team has bought roughly 70 billion yuan ($9.7 billion) of onshore Chinese shares in the past month, according to estimates by Goldman Sachs, which didn't give details on how it arrived at the numbers.
