China's sovereign wealth fund bought exchange-traded funds on Oct. 23, expanding its purchases beyond bank shares as authorities step up attempts to boost the country's slumping stock market.
Central Huijin Investment, a unit of the $1.4 trillion wealth fund China Investment that's long served as the main vehicle for China's holdings in state-run banks, bought an undisclosed amount of ETFs and vowed to keep increasing its holdings, it said in a brief statement.
Huijin may have purchased 10 billion yuan ($1.4 billion) in ETFs, the China Fund newspaper reported Oct. 24, citing brokerage estimates. The purchases may be focused on ETFs tracking technology-stock indices, which comes in line with regulators' support of innovation, it said, citing Huachuang Securities analysis.
The move came shortly after the sovereign fund bought about $65 million of shares in the nation's biggest banks this month, a symbolic step that has so far failed to boost sentiment. The CSI 300 Index has fallen 10% this year, closing at the lowest level since February 2019 on Monday, as investors remain worried about growth and the property-market crisis even after the government's rounds of support measures.
The benchmark was up 0.4% as of 2:24 p.m. in Hong Kong on Tuesday after a four-session losing streak.
Central Huijin's purchases of ETFs tracking indices can have "more direct, more obvious" effects on the market than buying bank shares, especially as the economy is stabilizing, Li Zhan, chief economist at China Merchants Fund Management's research department, was cited by the official Shanghai Securities News as saying.
Turnover on the Huatai-Pinebridge CSI 300 ETF, one of the most-held ETF products by Huijin, jumped to the highest in two months on Oct. 23, nearly three times its average over the past year.
The sovereign fund's moves underscore concerns among top leaders over the sinking market. China is considering forming a state-backed stabilization fund to shore up confidence in its $9.5 trillion stock market, people familiar with the matter told Bloomberg earlier this month. After at least two rounds of consultation with industry participants over a period of months, financial regulators including the China Securities Regulatory Commission recently submitted a preliminary plan to the nation's top leadership, said the people.
There have been growing calls from Chinese economists and hedge funds for the government to directly intervene with a stabilization fund to buy stocks for the first since the market crashed in 2015. The fund could buy different values of stocks when the index is below certain levels and sell when the gauge rises above designated lines, preventing both excessive declines and overheating while making a profit, Li Bei, founder of Shanghai Banxia Investment Management Center, wrote in an Oct. 10 WeChat article that was removed the following day.
