This strategic investment, worth approximately $65 million, is equivalent to approximately 0.01 percentage point in each bank. The impact on the market was immediate and substantial, with shares of these major banks rising between 2.43% and 4.73% in the early hours of Thursday.
China’s sovereign wealth fund, Central Huijin Investment Ltd., has taken a significant step to boost the country’s struggling stock market. In a move similar to its 2015 intervention, Huijin has increased its stake in China’s top four banks. Bank of ChinaThe Agricultural Bank of ChinaThe China Construction Bankand Industrial and Commercial Bank of China.
This strategic investment, worth approximately $65 million, is equivalent to approximately 0.01 percentage point in each bank. The impact on the market was immediate and substantial, with shares of these major banks rising between 2.43% and 4.73% in the early hours of Thursday. Additionally, the move lifted the CSI 300 index by 0.69%.
Addressing economic challenges and promoting stability
Amid challenges in the Chinese stock exchange market, the CSI 300, a stock market index comprising the top 300 stocks traded on the Shanghai and Shenzhen stock exchanges, fell to its lowest level in 11 months on Tuesday last week. To address this market slowdown, the Chinese government implemented a number of measures to stabilize the market, including slowing the pace of initial public offerings (IPOs), curbing sales by certain major shareholders, imposing a stamp on stock transactions. This includes reducing fees and simplifying rules related to it. Margin Trading.
Central Huijin Investment’s decision to strengthen its stake in China’s top four banks comes at a critical juncture for China’s economy. Amid concerns of a real estate crisis, top companies such as Evergrande and Country Garden are struggling to manage their debt obligations, adding to deflationary pressures. The country’s growth target of about 5% for the year is also at risk. Economists and investors have urged the government to intervene and stabilize the market.
Historic rescues of Huijin and their impact on the Chinese market
Huijin’s new fund’s investment has been met with optimism, signaling the government’s commitment to addressing economic challenges and ensuring stability in the financial sector.
This recent action by Huijin is not the first time he has done something like this. According to analyst Hao Hong, Huijin has intervened on six other occasions, including during the 2008 financial crisis and the 2015 market crash. These government-backed interventions have historically stabilized stock prices and increased investor confidence. Hao Hong emphasized that Huijin’s purchases send a strong top-down signal, helping to boost market confidence. Fund manager Li Fuwen echoed these sentiments, emphasis Given the current economic environment, there is a need for a new source of funding.
Central Huijin, China’s sovereign fund under the State Council, announced it will increase stakes in China’s Big Four banks and intends to continue doing so over the next six months.
However, during this round of purchases, Huijin’s stake in the four big banks increased by only 0.1%… pic.twitter.com/EKTqajsHsi
– Hao Hong 洪灝, CFA (@HAOHONG_CFA) 12 October 2023
Despite the short-term relief, experts warn that fundamental economic issues will ultimately shape market momentum. Investors are anxiously awaiting China’s third-quarter GDP data, due to be released next week, which should provide insight into the country’s economic health.
The global financial community is closely monitoring China’s economic indicators, believing that the country’s efforts to address these challenges will have a profound impact on the global economy. As stakeholders anticipate further policy decisions in the coming months, they are hopeful for continued stability and renewed confidence in China’s financial markets. Huijin’s bold steps have sparked optimism, underscoring the government’s commitment to tackling economic challenges and promoting stability.
Temitope is a writer with over four years of experience writing across various fields. He has a special interest in the Fintech and Blockchain sectors and enjoys writing articles in those areas. He has bachelor’s and master’s degrees in linguistics. When he’s not writing, he trades Forex and plays video games.
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