Chinese state newspaper seeks to talk up beleaguered stock market, citing buy-backs, improving economy

Investors should be optimistic, as multiple signs emerge that bode well for equities, the Securities Daily said in an opinion piece
‘Investors should not care too much about the index level, and be confident in looking forward from a longer perspective,’ said the editorial

China stock market

Zhang Shidongin Shanghai

Published: 1:30pm, 20 Sep, 2022

Why you can trust SCMP

China’s state propaganda machine is once again seeking to instil confidence in stock investors, urging them to take a long-term view of a market that is increasingly underpinned by positives from an improving economy to a flurry of buy-backs and attractive valuations.

Investors should not be pessimistic about the stock market, as multiple signs emerge that bode well for equities, the Securities Daily said in an opinion piece on its front page on Tuesday.

“For mature investors, following the market trend and seeing the logic clearly is the long-term winning strategy, instead of caring about the index level in the short term,” the editorial said. “Currently, the economic trend, which is closely linked to the performance of A shares, has shown signs of picking up, which investors should observe carefully.”

The newspaper, which is one of the four authorised publications for listed companies’ filings, is owned by the Economic Daily Press Group that is ultimately controlled the Communist Party’s propaganda department.

The opinion piece came as fears of a sizeable interest-rate increase by the Federal Reserve later this week grip global markets. The Fed will probably lift the borrowing cost by at least 75 basis points when its open-market committee meets on Thursday local time.

China’s CSI 300 Index edged up 0.1 per cent on Tuesday, snapping a streak of four daily declines. Still, the gauge remains down 13 per cent from a high on July 4.

The Securities Daily commentary cited the acceleration in economic data in August, stock buy-back plans of 102 publicly traded companies this quarter and the price-to-earnings ratio of about 11 times for the biggest onshore stocks as the tailwinds that will drive up share prices.

It is the latest move by China’s state media to revive confidence in the nation’s US$9.9 trillion stock market. Earlier this month, the Economic Daily, a publication that has the same owner as the Securities Daily, ran a commentary asking local traders to look past Warren Buffett’s divestment in Chinese electric-vehicle maker BYD and remain bullish on green-energy stocks.

Goldman Sachs said in a report on Sunday that China’s state-backed funds, which have 400 billion yuan (US$57 billion) of idle capital, may intervene in yuan-traded stocks in the run-up to the Communist Party’s 20th national congress next month to stabilise sentiment.

The US investment bank expects Chinese stocks to remain sluggish before the political event, because of the government’s strict zero-Covid policy and the housing market crisis.

Some of China’s biggest investment banks are on side with the state media. China International Capital Corp said shrinking trading volumes were probably a sign of receding selling pressure and liquidity was still sufficient to support stocks.

The combined turnover on the Shanghai and Shenzhen exchanges dropped to 633.9 billion yuan on Tuesday, a level not seen since April 2021 and about a third below the daily average this year, according to Bloomberg data.

“Investors should not care too much about the index level, and be confident in looking forward from a longer perspective,” said the Securities Daily editorial.