China Seeks to Boost Stock Market as Xi Speech Disappoints

(Bloomberg) — Chinese regulators are ramping up efforts to support the stock market, which saw little reprieve from President Xi Jinping’s speech amid continued pressure from geopolitical tensions and the Covid Zero policy.

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A series of market-supporting measures are in the pipeline, including proposals to encourage companies to buy back shares and to ease curbs on short-term transactions by overseas mutual funds. In a sign that private firms are heeding the government’s efforts, at least eight mutual funds announced plans on Monday to invest in their own equity products.

The benchmark CSI 300 Index ended up 0.1%, reversing earlier losses as investors weighed Xi’s speech against the prospect of measures. The Hang Seng Index climbed 0.2%, while a gauge of Chinese stocks trading in Hong Kong also eked out gains.

Stock investors have been looking for fresh market impetus after suffering losses that have been among the worst in the world. Xi’s renewed pledge for tech self-reliance trigged a rally in the sector’s stocks, but the overall market reaction was muted as he defended the Covid Zero policy and fell short of promising further support for the property sector.

Funds that announced plans to invest in their own equity products include E Fund Management Co., Southern Asset Management Co. and China Universal Asset Management Co. The moves, though, will add only short-term effect, according to Steven Leung, executive director at UOB Kay Hian in Hong Kong.

While the changes may help stem further losses, it may not be enough for a turnaround, said Yan Kaiwen, an analyst with China Fortune Securities. “What we expect to see are clearer policy signals from the Party Congress that can help lift economic growth in the fourth quarter.”

Mutual fund pledges were also made during previous market routs, including earlier this year and the one at the start of the pandemic selloff in 2020. The buying had failed to reverse the downtrend as traders focused on the economy’s weak fundamentals.

Investor sentiment may face fresh blow from an announcement after markets closed Monday that China will be delaying the release of its key economic data, including quarterly growth data that was due the following day.

On the market support measures, China’s securities regulator is planning to ease restrictions on short-term stock transactions by overseas mutual funds, according to a report Monday by the state-run China Securities Journal.

That comes after the the China Securities Regulatory Commission said last week it is reviewing changes in relevant laws to allow firms to buy back stakes six months after being listed, down from 12 months currently. Companies would be allowed to buy back stakes when stock prices fall 25% instead of 30% over 20 trading sessions.

A handful of Chinese brokerages also presented more positive outlooks on the market over the weekend. Citic Securities Co. said a recovery in onshore market will last for several months, while Cinda Securities Co. predicted the start of a V-shaped turnaround due to low valuation and a possible peak in US inflation.

The proposed new measures are “positive news” and will “play a certain role” in propping up the stock market, said Wu Xuan, chief market analyst at Topsperity Fund. “Looking from a longer term, now is a good time to invest as valuations of mainland stocks are low,” he said.

(Updates throughout)