China ‘national team’ fund makes $64 billion from stock rescue

SINGAPORE - A unit of China’s sovereign wealth fund has reaped paper gains of more than US$50 billion (S$64 billion) buying local exchange-traded funds (ETFs), highlighting the scale of government support for the country’s stock market, according to Bloomberg Intelligence.

Central Huijin Investment, an arm of China Investment Corp (CIC) and one of the funds that form part of the so-called National Team, started aggressively investing in the nation’s ETFs in 2023 and held US$180 billion of such assets at the end of August, filings show.

That has helped to stabilise domestic equities and also reaped substantial gains as stocks rose to multi-year highs.

The firm’s endeavours reflect the Chinese government’s effort to pump billions of dollars into domestic index funds and steady the stock market from jitters fuelled by rising tariffs and a stuttering economy.

That same undertaking has helped China’s ETFs become the largest in the Asia-Pacific region, surpassing even Japan’s.

But it also raises questions about whether the revitalisation of bourses across Greater China is based on retail investor sentiment or government-issued loans.

But it also raises questions about whether the revitalization of bourses across Greater China is based on retail investor sentiment or government-issued loans.

The People’s Bank of China said in April that it would step up funding support through a relending program to Huijin to keep markets operating smoothly. 

“Huijin appears to have secured substantial funding for its ETF purchases,” Bloomberg Intelligence analysts Rebecca Sin and Jack Wang said in a research note.

High turnover in ETF trades relative to the number of transactions shows that institutions are more active in the market than individual investors, they said. 

“Although the number of trades is still below the record late last year, the turnover is approaching that peak,” Bloomberg Intelligence said. “The disparity – significantly lower volumes than turnover – suggests greater institutional than retail involvement.”

Huijin’s largest holdings are in Huatai-PineBridge CSI 300 ETF and E Fund CSI 300 ETF, with about US$45 billion in both.

Those positions alone scored gains of around US$15 billion. Other big wins included the E Fund ChiNext ETF, which saw a 51 per cent gain. 

More recently, however, outflows have accelerated amid attempts by Beijing to cool the surging stock market. The Huatai-Pinebridge fund, majority held by Huijin, is on course for a fifth straight month of outflows, the longest streak since the global pandemic began in 2020, according to data compiled by Bloomberg. BLOOMBERG