Now the hope is that the confidence level can sustain.
1) China to allow exchangeable bonds to ease stock oversupply (5 September 2008)
The China Securities Regulatory Commission (CSRC) will allow shareholders of listed companies to issue exchangeable bonds, a move to ease oversupply in the stock market that has helped to drive down share prices.
The CSRC published a draft regulation on the newly-introduced financing tool on its website on Friday night, soliciting public comment by Sept. 12.
Shareholders can issue bonds with an embedded option to exchange the bond for the stock of a company other than the issuer at least a year after the issuance, according to the regulation.
Such bonds could provide shareholders with a new funding channel other than simply dumping their holdings. This would ease the impact of heavy selling, said an unidentified CSRC official in a statement on the website.
Heavy selling has been cited as a factor that has aggravated liquidity strains in the country's flagging stock market.
2) China steps up pace of foreign fund approvals (13 September 2008)
China's securities regulator, seeking to support a slumping stock market, has given approval for six more foreign institutions to invest in Chinese securities.
The licensing of the six institutions in August marks the fastest monthly pace of approvals in nearly four years, the official Shanghai Securities News said on Saturday.
It brings to 65 the total number of investors in China's Qualified Foreign Institutional Investor (QFII) scheme, which was launched in 2003 as the main way for foreigners to buy Chinese equities.
The newly approved investors still need to obtain currency quotas from China's foreign exchange regulator. Individual quotas are commonly around US$100 million to US$200 million, and quotas issued so far total roughly US$11 billion.
China agreed in talks with the United States late last year to raise the ceiling for the combined quota to US$30 billion from US$10 billion. But it has been reluctant to grant new QFII licences rapidly, partly because large inflows of foreign funds could destabilise its markets.
In the past two months, however, a plunge of the main stock index to 21-month lows, down 66 per cent from last October's peak, has prompted the securities regulator to promise to bring in more foreign funds to help stabilise stock prices.
Meanwhile, slowing appreciation of the yuan against the dollar has threatened to trigger net capital outflows from China, potentially giving the foreign exchange regulator more room to permit inflows into the country.
Foreign investors cannot bring in enough money to make much of an impact on China's stock market; combined QFII quotas are equivalent to less than 1 per cent of market capitalisation.
But foreigners were among the first investors to start pulling out of the market as it peaked late last year, so signs of fresh buying by them could boost local investors' confidence.
The six QFII institutions approved in August include ACE INA International Holdings, an affiliate of New York-listed insurer ACE, Canada's Caisse de depot et placement du Quebec, and the corporation running Harvard University in the United States, according to the securities regulator's website.
The others are South Korea's Samsung Investment Trust Management Co, AllianceBernstein of the United States, and Singapore's Oversea-Chinese Banking Corp.
[Take note, OCBC one of them.]
3) China cuts rates, lowers reserve ratio (15 September 2008)
China's central bank Monday cut the cost of bank loans, the first time since 2002, and lowered the proportion of money lenders must have as reserves, the first such move in nine years, to keep the economy from sliding further.
The benchmark lending rate will be lowered by 0.27 percentage point to 7.20 percent from Tuesday, but the interest rate of deposits remains unchanged.
The 1 percentage point cut from the reserve requirement ratio of 17.5 percent does not apply to the five biggest banks and the Postal Savings Bank, the People's Bank of China (PBOC) said on its website. And banks in areas hit by the devastating May 12 earthquake will have their ratio cut by 2 percentage points. These changes will come into effect from Sept. 25.
"The adjustment is directly related to the macro-economic data for August," said Zhang Jun, director of Fudan University's China Center for Economic Studies.
The figures for the economy in August, released last week, showed a drop in consumer inflation but a rise in factory gate cost (or producers price index, PPI), a weakening industrial output and falling imports. All these indicate "downside economic risks", Zhang said.
The rising PPI and falling consumer price index (CPI) rate mean corporate earnings would suffer as costs rise, and that would ultimately hurt economic growth, Liu Dongliang, economist with the China Merchants Bank, said. "The country is facing the danger of an economic downturn."
The government adopted tightening measures in the second half of last year to prevent the economy from overheating and keep the CPI from rising out of control.
It has raised the interest rate six times and the reserve requirement ratio 15 times since last year, with the latest ratio increase being the fifth this year.
The tightening measures have yielded results, but the change seems to have come much sooner than expected, prompting the authorities to ease the policies, Zhang said.
The country's GDP for the second quarter grew 10.1 percent year-on-year, compared to 11.9 percent for the whole of 2007.
The situation is similar to what it was 10 years ago, when the macro-economic regulation before 1997 coupled with the 1997-98 Asian financial crisis, hit the economy hard and pushed it into deflation, he said.
Now the economy faces a slowdown at home and is already feeling the winds of the U.S. financial turmoil.
Policymakers later adopted a series of measures, such as bolstering small and medium-sized enterprises (SMEs), to maintain a stable economic growth.
The SMEs are the most dynamic components of the economy, accounting for three-fourths of the total jobs in the country and producing 60 percent of the goods and services. And it is they that have suffered the most since last year because of the tightening policies.
Banks usually do not like sanctioning loans to SMEs because of fears they may fail to pay back in time, and the tightening policies have worsened the situation for them, analysts said.
"The key issue now is how to better allocate the lending resources to ensure SMEs have more access to loans," Zhang said. The PBOC has cut the requirement for smaller banks because most of their loans go to SMEs.
But the liquidity problem has not been fundamentally solved, he said, and the authorities have stopped short of applying the cut in reserve requirement ratio to major banks.
4) China cancels stamp tax on stock purchase to support equities market (18 September 2008)
China decided on Thursday to scrap the stamp tax on stock purchase, effective on Friday, in a move to boost the equities market after domestic stocks fell for third consecutive day since Tuesday.
With the authorization of the State Council, China's Cabinet, the Ministry of Finance and the State Administration of Taxation said they decided to cancel the share trading stamp tax on stock purchase while the stamp tax on share selling remained unchanged at 0.1 percent.
The cancellation came hours after Chinese stocks tumbled 1.72 percent on Thursday, amid the current global financial turmoil.
It was the first time since 1991 authorities had levied an unilateral stamp tax on stocks trading and the second time this year they had adjusted the stock trading stamp tax.
On April 24, it cut the tax from 0.3 percent to 0.1 percent amid falling share prices.
5) State investment arm to shore up three Chinese lenders' shares with stock-buying plan (18 September 2008)The Central Huijin Investment Co.,Ltd., an investment arm of the Chinese government, said Thursday it would buy the shares of three major Chinese lenders on the secondary market to shore up their share prices amid stock market slumps.
The company said it would buy the shares of the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank and operations had started on Thursday.
Central Huijin was set up in 2002 with a mission to reform state-owned banks burdened with a high ratio of non-performing loans.
6) China supports strategic SOEs to buy more stocks of listed subsidiaries (18 September 2008)
China is to back up its 147 centrally-administered state-owned enterprises (SOEs) in buying more stocks of their listed subsidiaries, the top state assets regulator said here Thursday.
Li Rongrong, the State-owned Assets Supervision and Administration Commission (SASAC) director, said the regulatory body had long held SOEs, particularly the 147 which report to the central government, should be an active force in facilitating a stable development of the stock market.
Companies mainly owned by the 147 giants should play a exemplary role on the market, he added.
Li stressed the Chinese economy was basically sound, and the 147 conglomerates were performing well. The SASAC supported them to buy more stocks of their listed companies based on their own growth requirements.
Chinese stocks have continued to hit new lows amid worries about global financial turmoil and the slowdown of the domestic economy. On Thursday, Chinese stocks tumbled 1.72 percent, the third fall in three days.
Latest Updates
23 September 2008
- China Huijin increases stake in three top commercial lenders
BEIJING, Sept. 23 (Xinhua) -- Chinese three largest commercial banks announced Tuesday that Central Huijin Investment Co., Ltd., an investment arm of the government, had increased its shareholdings of the three banks.According to announcements released by the banks on Tuesday evening, Huijin has increased shareholdings of 2 million shares for each bank through shares purchase on the Shanghai Stock Exchange.
China Construction Bank (CCB) said that following the acquisition, Huijin holds 152,844,297,904 shares of the CCB (including 2,000,000 A-shares and 152,842,297,904 H-shares), representing approximately 65.405 percent, up from 65.4041 percent, of the total issued share capital of the bank.
The Industrial and Commercial Bank of China said Huijin now holds 118,008,174,032 shares in the bank after the acquisition, increasing its stake in the country's top lender from 35.3292 percent to 35.3298 percent.
The Bank of China said the government investment arm now holds 171,327,404,740 shares in the bank after the purchase, increasing its stake from 67.4937 percent to 67.4945 percent.
It is one of a package of moves by the government to stabilize the sliding stock market, including the recent cancellation of the stamp tax on stock purchases.
Huijin intends to continue to increase its shareholdings in the three banks on the secondary market within 12 months commencing from the date of this share acquisition, according to the banks' announcements.
19 September 2008
- Chinese shares soar 9.46% as Beijing gives market a boost
19 Sept (AFP) -- SHANGHAI - Chinese share prices closed 9.46 per cent higher on Friday in the fastest one-day rise in nearly seven years after the government abolished a tax on buying shares to boost the market, dealers said.
Every stock traded on Friday rose the maximum ten percent daily limit in the first session since the government announced it was abolishing a 0.1 per cent stamp duty tax on buying shares.
The benchmark Shanghai Composite Index, which covers A and B shares, was up 179.25 points at 2,075.09. It was the most the index has climbed since October 23, 2001, when it it rose 9.9 per cent.
However, analysts cautioned that the market, still down 60.6 per cent since the start of the year, remained fragile because investors were still nervous about the turmoil in the financial world.
"Beijing's moves are going to have a psychological rather than any long-term impact. Beijing cannot, for example, stop the financial crisis from happening in the US but this is what has been distressing the markets," Orient Securities analyst Mo Guangliang told Dow Jones Newswires.
The government also announced late Thursday that the domestic arm of China's sovereign wealth fund, Central Huijin Investment Co, was increasing its stake in three leading Chinese banks to help shore up their stock prices.
But analysts were skeptical that the move was anything more than symbolic because Huijin was already the principal shareholder in all three.
Nonetheless the banks all rose 10 per cent with the Industrial and Commercial Bank of China closing at 3.78 yuan, Bank of China at 3.36 yuan, while China Construction Bank rose to 4.19 yuan.
The rally was expected to continue on Monday.
Shares quickly hit the daily limit early Friday and trading tapered out in the afternoon as most investors opted to hold out for better prices before disposing of their shares, Guotai Junan analyst Xu Yinhui told Dow Jones.
Those who wanted to buy could not bid more than the 10 per cent limit's rise in share prices.
"Today, those who own shares refused to sell, clutching their shares as if their life depended on it," Xu said. But he warned: "Soon, shares will be regarded as junk again."
Zhang said there was also pressure from previously non-tradeable shares that have recently hit the market, boosting the share supply and further depressing stock prices.
The Shanghai A-share Index gained 188.21 points, or 9.45 per cent, to close at 2,179.11 and the Shenzhen A-share Index jumped 51.00 points, or 8.88 per cent, to 625.33.
The Shanghai B-share Index closed up 10.87 points, or 9.82 per cent, to 121.60, while the Shenzhen B-share Index rose 26.56 points, or 9.32 per cent, to 311.68.
The yuan closed the day at 6.8350 against the US dollar, down from Thursday's finish of 6.8340.
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