Chinese domestic equities faced severe pressure in October as the CSI 300 Index entered bear market territory and the Star 50 index plummeted by up to 48%. In response, authorities deployed the state-backed national team, offered low-cost liquidity for share buybacks, and barred institutional selling. The downturn has been exacerbated by domestic insurers, which were encouraged to inject capital into the market but subsequently sold shares near the peak to mitigate mounting balance-sheet losses.
Key points
Regulators are issuing window guidance to prevent domestic institutional investors and br…: Regulators are issuing window guidance to prevent domestic institutional investors and brokerages from selling their shares.
State-owned insurers sold off tech holdings in late September to protect their balance sh…: State-owned insurers sold off tech holdings in late September to protect their balance sheets and fulfill structural risk obligations.
The People’s Bank of China is providing low-cost funding to support institutional liquidi…: The People’s Bank of China is providing low-cost funding to support institutional liquidity and finance corporate share buybacks.
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China is scrambling to contain a stock-market rout only two years after the previous rescue.
Beijing is dusting off the market-support playbook it deployed in 2024. The People’s Bank of China is providing low-cost funding for corporate share buybacks and liquidity for institutional investors. The shadowy “national team” appears to have stepped up its operations, while regulators are again resorting to window guidance — informally instructing institutional investors and brokerages not to sell.
In October, China’s stock market suffered its worst monthly decline in more than a decade. The blue-chip CSI 300 Index has fallen into a bear market from its late-June peak, while Shanghai’s semiconductor-heavy SSE Science and Technology Innovation Board 50 Index, or Star 50, has plunged as much as 48%.
So who’s been selling? The blame game has already begun. Shiva Capital Group, one of China’s biggest hedge funds, has pointed the finger at insurers. In a recent letter to clients, founder Hong Liang accused the insurance firms of piling into technology stocks near their July peak, only to slash positions in late September. The behavior was…
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