Commentary on Political Economy

Wednesday 7 February 2024


 China share trading hits five-month high on help from Beijing


Trading activity in China’s largest listed companies has surged to a five-month high, reflecting what analysts said was a likely increase in buying by Beijing’s “national team” of state-run financial institutions.

Daily turnover for stocks included in the CSI 300, CSI 500 and CSI 1000 indices — which together account for the majority of the Chinese stock market’s trading activity — rose to Rmb699bn ($98.3bn) yesterday, the highest level since August 28, according to a Financial Times analysis of figures from Chinese data provider Wind.

The CSI 300 index, which contains the largest and most liquid Shanghai- and Shenzhen-listed stocks, is up 4 per cent this month after shedding more than 6 per cent in January.

Chinese authorities have repeatedly tried to boost stock market confidence. Yesterday, state media announced the removal of Yi Huiman, the powerful Communist party boss and chair of the China Securities Regulatory Commission, a move seen by financial sector observers as making him a scapegoat for recent share price falls.

The latest rise in trading activity comes after Central Huijin, an investment arm of the country’s sovereign wealth fund, announced on Tuesday that it would expand its purchases of exchange traded funds.

The CSI 500, CSI 1000 and CSI 300 indices jumped on the announcement.

“Valuations are at a reasonable level for the national team to buy in,” said Xia Chun, chief economist at Forthright Financial Holdings in Hong Kong. “Besides, any [retail] investors who had the money to invest in stocks have basically lost everything already.”

Chi Lo, senior Asia-Pacific strategist at BNP Paribas Asset Management, said the scale of state buying was not clear.

But he added that the sharp sell-off in Chinese equities in January had “scared Beijing” and that recent policy announcements showed that officials were “trying to short-circuit that downward momentum”.

Trading volumes in some exchange traded funds tied to the CSI 300 index surged following yesterday’s announcement, with volumes of two ETFs linked to the index managed by Harvest Fund Management and China Asset Management reaching record highs, according to Wind. A similar ETF managed by a joint venture between PineBridge and Huatai Securities also showed a significant rise in activity.

The total daily turnover of Shanghai-and Shenzhen-listed stocks also passed Rmb1tn yesterday for the first time since November 21.

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