China Boosts Stocks: New Support Tools Deployed

China's central bank is increasing its efforts to stabilize the stock market and bolster investor confidence. The People's Bank of China announced it will make fuller use of two key stock support tools, including its swap facility for financial institutions and a relending facility for share buybacks. These tools, initially introduced in October 2024, are designed to provide financial support to listed companies and major shareholders.

The PBOC is adjusting the terms of these facilities to enhance their effectiveness. Specifically, the rate on the relending facility for share buybacks and stake increases will be lowered to 1% from 1.25%, and the program will become permanent. The central bank also plans to increase the number of participating institutions in its swap operations and moderately reduce associated fees.

These new measures underscore Beijing's strategy to cultivate a more stable "slow bull" market environment. The goal is to encourage household savings to flow into the equities market. However, persistent stock market volatility, influenced by a weak economy and concerns over corporate earnings, has made this objective challenging.

In addition to central bank actions, the China Securities Regulatory Commission is set to ease share buyback rules. This includes allowing repurchases when stock prices fall below the initial public offering price and requiring companies with excess funds to buy back shares under certain market conditions. Studies are also underway to explore changes in margin-financing requirements to boost market liquidity.