BEIJING (Nov 4): Chinese banks applied for more than 200 billion yuan (US$30 billion or RM121.9 billion) in loan quotas this week to fund share purchases by listed companies, the central bank said on Wednesday, as Beijing steps up support for a struggling stock market.
The People's Bank of China (PBOC) also said it had cut the interest rate under the relending scheme by 0.25 percentage points to 1% starting Wednesday, meaning banks can obtain central bank loans at a lower cost to finance share purchases.
The PBOC prodded banks to accelerate extending the loans "to safeguard stable operation of the capital markets."
China's stock market jumped more than 2% on Wednesday in its best day in seven months, partly encouraged by the announcement. Investors also cited the US midterm results.
The PBOC's relending policy for stock buying is part of Beijing's measures to shore up confidence in a stock market reeling amid a sluggish domestic economy and a sharp sell-off in tech shares.
China has the worst-performing major stock market globally this year, with the blue-chip CSI300 down 11% since January. The index notched its largest monthly fall for a decade in October, led by a slump in AI stocks.
China introduced the relending program for share purchases in September 2024 as part of efforts to arrest a market slide at the time. Those efforts kicked off a bull run.
The PBOC said on Monday that the scheme — under which banks borrow money from the central bank before lending to listed companies and major shareholders for stock buying — would be upgraded to a standing mechanism, from a temporary arrangement. The one-year loan can also be extended upon maturity.
The policy changes would "lower the borrowing costs and would make listed companies more willing ... to increase shareholdings or execute buybacks, thus injecting stability into the market," Founder Securities said in a note.
But Wang Yapei, a fund manager at Zijie Private Fund, said major shareholders of listed companies may not have a strong incentive to borrow money to buy shares that are falling.
Uploaded by Magessan Varatharaja