stock market Photo:VCG
Financial associations and companies continued to voice support for the Chinese capital market on Tuesday, following a symposium held by the China Securities Regulatory Commission (CSRC) that signaled its commitment to market stability amid recent volatility.
Following the announcement of large-scale shareholding increases by two central state-owned enterprises (SOEs) on Sunday evening, at least 15 central SOE-controlled listed companies had issued announcements as of Tuesday, sending positive signals to the market through measures such as increasing shareholdings, share buybacks, and dividend distributions, according to the WeChat account of the State-Owned Assets Supervision and Administration Commission (SASAC).
Seven listed firms of central SOEs, including China Three Gorges Renewables (Group) Co, Aluminum Corp of China Ltd and rolling stock manufacturer CRRC Corp Ltd, have pledged share increases in the range of 3.85 billion yuan ($568 million) to 7.55 billion yuan, the post showed.
Industry observers said that the stake increases and share buybacks by central SOEs are not merely short-term efforts to support stock prices. Instead, they reflect long-term confidence in the resilience of the Chinese economy, support the growth of new quality productive forces, and may help the A-share market better reflect the value of competitive companies.
The Asset Management Association of Shanghai, together with its member institutions including bank wealth management subsidiaries, insurance asset management companies, public funds and private funds, said in a statement on its official WeChat account on Tuesday that it firmly believes in the promising prospects of China’s capital market and is fully committed to serving the national strategic layout.
The statement said that it will continue to organize its member institutions to practice the principles of “rational investment, value investment, and long-term investment” in the capital market, as they are determined to act as discoverers of value in China’s capital market, stabilizers for maintaining market stability, and the main force in serving the real economy.
The association vowed to guide its members and enhance their capabilities in serving the real economy, technological innovation, and household wealth management. Through high-quality development of Shanghai’s asset management industry, it aims to promote the high-quality development of China’s capital market.
Taiping Asset Management Co, a major insurance funds manager in China, stated that the company has always maintained confidence in the long-term positive outlook of China’s economy, and has closely aligned with policy requirements such as modernizing the industrial system and serving the development of new quality productive forces, the Securities Times reported on Tuesday.
The company said that it will actively promote the entry of medium- and long-term funds into the market, and fully support the sound and stable development of the capital market.
As the volatility of global capital markets has spilled over into China’s A-share market, the CSRC on Monday held an investor symposium in Beijing, where Chairman Wu Qing said that the regulator will do its best to prevent market risks, strengthen market supervision, promote the high-quality development of the capital market, and safeguard stable market operation.
Late on Sunday, two central SOEs focusing on investment – China Reform Holdings Corp Ltd and China Chengtong Holdings Group Ltd – announced support measures of about 60 billion yuan.
China Reform Holdings said that its subsidiary had used more than 50 billion yuan in special re-lending facilities for share buybacks and stake increases, alongside its own funds, aiming to safeguard market stability. China Chengtong Group revealed that it had purchased nearly 10 billion yuan of shares in central SOEs, technology companies and exchange-traded funds.
“The latest stake increases show a close match between policy support and market needs,” Tian Lihui, dean of the Institute of Financial Development at Nankai University, told the Global Times on Tuesday.
“The central bank’s special re-lending facility for share buybacks and stake increases, launched in September 2024, for the first time connected monetary policy with support for market stability. It gave state-owned capital access to low-cost, longer-term funding. After the recent market correction, the prices of some major assets have fallen below levels supported by their fundamentals. Central SOEs, as patient investors, are using the policy while also meeting SASAC requirements to include market value management in performance reviews.”
Tian added that purchases by central and state-owned firms can ease unreasonable selling pressure in the short term. Over time, they can strengthen investors’ recognition of high-quality assets that are trading at low valuations.
Chinese stocks closed higher on Tuesday, with the benchmark Shanghai Composite Index up 1.79 percent at 3,864.37 points. The Shenzhen Component Index was up 4.81 percent at 14,264.29 points.
Foreign financial institutions have also noted opportunities in the A-share market following the recent adjustment.
Goldman Sachs maintains an overweight stance on A-shares, particularly favoring artificial intelligence (AI) and overseas expansion themes. The firm highlighted a valuation gap, with China’s AI potential estimated at 50 percent to 100 percent above current prices.
It also suggested that clients shift funds from South Korean AI stocks to similar stocks in China, according to media reports.
“After short-term volatility, we continue to view technology as the main market theme for the second half of the year,” Meng Lei, China equity strategist of UBS Securities, said in a research note sent to the Global Times on Tuesday.
“Now that the overcrowding in technology-sector trading has been partially alleviated, we believe that the technology sector and AI will remain the core market theme for the second half of the year,” Meng wrote.
