SHANGHAI – China’s sovereign wealth fund increased its stake in the nation’s biggest banks for the first time since 2015, stoking speculation that the authorities will intensify efforts to prop up its sinking stock market.

State-owned Central Huijin Investment bought about US$65 million (S$88.6 million) worth of shares in Bank of China, Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China, according to filings on Wednesday.

Huijin, a unit of the US$1.4 trillion China Investment Corporation, plans to further increase holdings over the next six months.

A growing number of Chinese economists and hedge funds are calling on the government to directly intervene with a stabilisation fund to buy stocks, a move the authorities have refrained from making since the 2015 market crash.

Concerns are now mounting among China’s top leadership over the trajectory of the world’s second-largest economy, as a deepening property crisis and rising deflationary pressure put the growth goal of around 5 per cent for the year at risk.

China’s benchmark CSI 300 Index has retreated more than 5 per cent this year even as hopes of fresh economic stimulus bolstered equities on Wednesday.

The financial sub-gauge is down 1.5 per cent in 2023, on track for a third year of losses.

Previous measures to support growth and the property market have done little to lift sentiment as foreign funds kept selling. 

“Central Huijin’s modest yet symbolic investments are very likely aimed at supporting share prices, which has already led to a positive market response,” Mr Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong, said in a note.

“This move, reminiscent of its actions during the 2015 Chinese equity market turmoil, signifies the government’s desire to maintain market stability.”

China’s top three securities newspapers ran front-page reports on Thursday about the bank-stock purchases, saying they are a significant measure to prop up the equity market and boost investor confidence.

“Huijin’s increase in the holdings sends a clear positive signal and is an important measure to activate the capital market,” Shanghai Securities News said.

“It is conducive to boosting market confidence. After a long period of correction, the investment value of A-shares is gradually emerging and is expected to gradually bottom out.”

The sovereign wealth fund first dipped its toe in the secondary market in 2008 by purchasing shares of the nation’s three largest lenders at the height of the global financial crisis, and made similar purchases in the following years until 2015. Shares mostly rallied after the moves.

Huijin holds stakes in 19 financial institutions, including banks and brokerages, according to its website.

Its move comes amid an ongoing exodus of foreign funds from the world’s second-largest equity market, with domestic shares ranking among the worst-performing globally in 2023.

Among its package of measures to soothe investor nerves, the Chinese authorities have cut handling fees for stock transactions and stamp duty, and are considering relaxing the rules that cap foreign ownership in domestic publicly traded firms, people familiar with the matter have said.

The securities regulator said in September it will slow the pace of initial public offerings (IPOs), and also restricted share sales by top stakeholders at firms whose stock prices have fallen below IPO levels or net asset levels.

“The national team buying is a much bigger deal to the market and to confidence than the trove of measures including lowering the stamp duty in August,” said fund manager Li Fuwen of Guangdong Value Forest Private Securities Investment Management.

“What the market is in desperate want of now is (a) fresh source of funds, and even if it is just a few hundred million a day, this is the way to salvage confidence.”
BLOOMBERG