The People's Bank of China has permanently established its buyback relending facility while lowering the interest rate to 1% to accelerate capital deployment. Concurrently, securities regulators are revising repurchase criteria to mandate action from firms trading below initial offering prices or holding excess cash reserves. The swap facility for institutional investors is also expanding, with 31 approved firms seeking more than 100 billion yuan in the forthcoming third round. These interventions follow October's 8.5% plunge in the CSI 300 Index, which marked its steepest monthly slide in over a decade.
Key points
Regulators are compelling share repurchases for entities with surplus capital or stock va…: Regulators are compelling share repurchases for entities with surplus capital or stock values trading under original offer prices.
Authorities are deploying coordinated balance-sheet support to incentivize domestic house…: Authorities are deploying coordinated balance-sheet support to incentivize domestic households to move savings out of bank deposits.
Steep monthly losses and 12 consecutive weeks of benchmark equity declines prompted Beiji…: Steep monthly losses and 12 consecutive weeks of benchmark equity declines prompted Beijing to aggressively loosen financing restrictions.
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China will encourage financial institutions to make fuller use of two stock support tools and optimize their terms, as authorities step up efforts to bolster market stability and confidence.
The People’s Bank of China said it will conduct operations under its swap facility for securities firms, funds and insurers when appropriate. It will also increase the number of participating institutions and moderately lower swap fees, the central bank said in a statement on Monday following a meeting with financial regulators and institutions.
Separately, it will cut the rate on its relending facility for share buybacks and stake increases to 1% from 1.25%, make the program permanent and encourage banks to increase lending, the PBOC said.
The two tools were introduced in October 2024 as Beijing sought to shore up the stock market. The relending facility provides low-cost central bank funding to banks for loans that finance share buybacks and stake increases by listed companies and major shareholders.
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