Central Huijin, a unit of China’s US$1.35 trillion sovereign fund, buys ETFs in another bid to shore up stocks

Central Huijin Investment has invested in exchange-traded funds tracking Chinese stocks in an attempt to bolster the market
The move comes amid equity sell-offs by overseas investors, which have reached US$22.4 billion in nearly three months

China stock market

Zhang Shidongin Shanghai

Published: 11:01am, 24 Oct 2023

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Central Huijin Investment, a unit of China’s US$1.35 trillion sovereign wealth fund, bought exchange-traded funds (ETFs) tracking underlying Chinese stocks in another bid to bolster the nation’s ailing equity market.

Central Huijin made the investment on Monday and will continue to increase such investments in future, the company said in a one-sentence statement on its website, without giving further details.

The purchase is the latest evidence of state buying gathering pace. This follows a slew of steps by the government to shore up stocks, from a cut in the stamp duty to restrictions on short selling and divestments by big shareholders. But these measures have failed to restore confidence among investors.

Central Huijin, managed by China Investment Corp, increased its stake in China’s big four state-owned banks including ICBC for 477.5 million yuan (US$65.4 million) two weeks ago, the first purchase since the 2015 market meltdown.

“There’s no need to be pessimistic about the market, given the positive signal from Central Huijin again,” said China International Capital Corp (CICC) in a note on Tuesday. “The fourth quarter is an important window for the ramp-up of policies. While there are headwinds that may weigh on sentiment in the short term, the market has already displayed some characteristics of bottoming out.”

This is the third time ever Central Huijin has made ETF investments, with the previous interventions taking place in June 20, 2013 and July 5, 2015, according to CICC.

The Shanghai Composite Index rose 0.8 per cent on Tuesday, rebounding from a one-year low, while the CSI 300 Index gained 0.4 per cent after sliding to a February 2019 nadir when the outbreak of Covid-19 in the central Chinese city of Wuhan and an ensuing lockdown triggered sell-offs.

Recent economic data that showed third-quarter growth exceeded estimates has failed to impress investors, who are instead focused on the troubled property market and the policy front that so far has remained restrained.

Nomura Holdings forecast gross domestic product growth will fall below 4 per cent next year, compared with the official target of around 5 per cent for 2023.

Calls for more direct government intervention in stocks in the form of a stabilisation fund have been growing louder among some prominent investors.

Li Bei, the founder of top-performing Chinese hedge fund firm Shanghai Banxia Investment Management Center, said such action could quickly revive confidence among investors and counter sell-offs by overseas investors.

Foreign selling has been a major driver of the tumult in Chinese stocks. Global fund managers have sold about 37 billion yuan of Chinese stocks via the exchange link with Hong Kong in October, bringing the total to 164 billion yuan in almost three months, according to Bloomberg data.