SMAR Daily Industry News

China Escalates Market Intervention With State Buying, Buybacks

China has intensified efforts to support its stock market, with state-backed investment funds significantly increasing their purchasing activity. A group of nine exchange-traded funds, frequently utilized by the so-called national team, recorded 76.7 billion yuan in inflows on Tuesday. This figure represents the second-highest daily inflow on record, trailing only the activity seen on April 8, 2025, during a period of market volatility following tariff announcements by President Donald Trump.

This surge in state-led buying follows the government's recent introduction of liquidity-injection measures. Following a nearly 4% decline in the previous session, China’s tech-focused Star 50 Index showed signs of stabilization on Wednesday, while the CSI 300 Index experienced a minor decline of 0.3%. Homin Lee, a senior macro strategist at Lombard Odier, noted that these actions indicate Beijing's acknowledgment that additional support is necessary, though the current approach appears focused on technical adjustments rather than broader structural changes.

Beyond state intervention, individual corporations are contributing to the stabilization efforts. CXMT Corp. has proposed increasing its share buyback program to a range of 2.5 billion yuan to 5 billion yuan, citing a commitment to investor protection. Additionally, Suzhou Dongshan Precision Manufacturing Co. announced a rare initiative, with controlling shareholders proposing to return at least 1 billion yuan to investors in 2026 through a combination of share buybacks and cash dividends.

These corporate actions align with new policies from the People’s Bank of China, which reduced the rate on its relending facility to 1% from 1.25% and established the program as a permanent fixture. This facility offers low-cost funding to banks specifically for loans supporting corporate share buybacks and stake increases. The central bank reported that Chinese banks have already applied for over 200 billion yuan in quotas under this program. Several other companies, including Ningbo Joyson Electronic Corp., Universal Scientific Industrial Shanghai Co., and Hwatsing Technology Co., have also disclosed new buyback plans.

Despite these coordinated efforts, some market observers remain skeptical about the long-term impact. Leonid Mironov, a portfolio manager at Gavekal Capital, suggested that while buybacks can provide a floor during selloffs, they are not a sustainable substitute for genuine market stability. He emphasized that for retail investor confidence to return, the market requires more than just temporary corporate intervention.

Why it matters

Investors should monitor whether these state-backed liquidity measures and corporate buybacks can provide a sustainable floor for Chinese equities or if they will fail to restore long-term market confidence.

FAQ

What is the primary goal of the new People’s Bank of China relending facility?
The facility provides low-cost central bank funding to banks for loans that specifically finance corporate share buybacks and stake increases by major shareholders.

How much capital did the 'national team' of investors inject into ETFs on Tuesday?
A basket of nine exchange-traded funds favored by the national team received 76.7 billion yuan in inflows.

Which companies have recently announced new share buyback plans?
Companies including CXMT Corp., Suzhou Dongshan Precision Manufacturing Co., Ningbo Joyson Electronic Corp., Universal Scientific Industrial Shanghai Co., and Hwatsing Technology Co. have announced or proposed buyback plans.

Source: Mint Markets. See the original source for full details.