China contemplates an ambitious stock market rescue for US$278 billion: the reasons

China contemplates an ambitious stock market rescue for US$278 billion: the reasons

Chinese authorities are exploring strategies to stabilize the decline in the stock marketAs Bloomberg News reported this Tuesday, citing sources familiar with the matter, which generated a skeptical response among some disillusioned investors.

According to information from that news agency, the authorities seek to mobilize approximately 2 trillion yuan (278.53 billion dollars), mainly from foreign accounts of state-owned companiesto establish a stabilization fund to acquire shares in the domestic market through the Hong Kong stock exchange.

The China Securities Market Regulatory Commission He did not respond to questions from Reuters.

Although Chinese stocks saw an immediate rise after the article was published, they subsequently reversed course and began to fall. At that time, the blue CSI300 index was near its lowest level in five years, while the Shanghai Composite Index remained below the key mark of 2,800 points.

Chinese stock markets have faced a difficult start to the year, marked by uneven economic growth and a new decline in home sales last weekwhich has led foreign investors to take a cautious approach.

Chinese rescue: the background

This information comes after the cabinet, in a meeting chaired by Premier Li Qiang on Monday, announced plans to step up the injection of medium and long-term funds into the capital market with the aim of strengthening stability and fostering a healthy development.

“The package of measures for the Chinese stock market is well received and shows the growing willingness of the authorities. However, at less than 2% of its GDP, we fear that it could be insufficient,” said Aninda Mitra, head of macroeconomics and strategy investment manager in Asia from BNY Mellon Investment Management.

International monetary managers, who have sold Chinese stocks as the post-pandemic recovery weakened, argue that it will take time or substantial stimulus to repair the real estate sector, which at the time represented a quarter of the economy, and change its perspectives.

So far this year, foreign funds have sold off about $1.6 billion in Chinese stocks, driven mainly by European active funds and Hong Kong passive money, according to a Morgan Stanley report last week.

Source: Ambito

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