China’s US$1.35 trillion sovereign fund boosts stake in Big Four banks, fuelling speculation on stock market intervention

Central Huijin Investment spent the equivalent of about US$65.4 million to pick up additional A shares in China’s four biggest lenders

The symbolic move is fuelling speculation Beijing is intervening to shore up confidence in the market after a record sell-off by foreign funds

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China’s sovereign wealth fund has acquired additional stakes in the country’s biggest banks including Industrial and Commercial Bank. Photo: CFOTO via Getty Images

Published: 10:05am, 12 Oct 2023Updated: 4:51pm, 12 Oct 2023

China’s US$1.35 trillion sovereign wealth fund is increasing its equity stakes in the nation’s four biggest banks, stoking speculation authorities are trying to shore up confidence in the market after an exodus of foreign funds and a slump in the local currency.

Central Huijin Investment, which owns strategic stakes in local financial institutions, picked up additional domestic shares in Industrial and Commercial Bank, Construction Bank, Bank of China and the Agricultural Bank of China, according to stock exchange filings late on Wednesday.

The purchases, which would have cost about 477.5 million yuan (US$65.4 million) based on their closing prices on Wednesday, may be symbolic. While they only boosted Central Huijin’s shareholding in each lender by 0.01 percentage point, the wealth fund would be raising its stakes further over the next six months, the banks said in their respective filings.

“This move, reminiscent of its actions during the 2015 Chinese equity market turmoil, signifies the government’s desire to maintain market stability,” Redmond Wong, China strategist at Saxo Capital Markets in Hong Kong, said in a note to clients. This proactive stance is expected to enhance sentiment, he added.

Central Huijin, a vehicle under China Investment Corp, undertakes domestic equity investments in state-owned financial institutions, without interfering in their daily operations. It exercises its rights and performs its obligations as a shareholder to the extent of its capital contribution, according to its website.

It directly held equity interests in 17 financial institutions, including banks, securities companies, insurance companies at the end of 2021, according to its latest annual report.

Central Huijin Investment’s portfollio of Chinese financial stocks at the end of 2021. Source: Annual Report

Shares of the Big Four lenders climbed by 4 per cent to 5.6 per centin Hong Kong, helping lift the Hang Seng Index to a five-week high. They gained 0.6 per cent to 3.2 per cent in Shanghai, while the CSI 300 Index jumped 1 per cent, the most in nearly three weeks.