On the 18th, the People's Bank of China, together with the State Financial Regulatory Administration and the China Securities Regulatory Commission, issued the (Notice on the Establishment of Stock Repurchase and Increase of Holdings Re-loans) (hereinafter referred to as the Notice), announcing the establishment of stock repurchase and increase of holdings re-loans to encourage financial institutions to provide loans to qualified listed companies and their major shareholders to support their repurchase and increase of company stocks. In principle, the loan interest rate shall not exceed 2.25%.

According to the announcement of the People's Bank of China, stock repurchase and shareholding increase re-loans will be issued on a quarterly basis, and 21 national financial institutions can provide relevant loans to eligible listed companies and their major shareholders holding more than 5% of the shares.

After financial institutions issue loans to listed companies, etc., they can apply for re-loans from the central bank in the first month of the next quarter. For eligible loans, the central bank will provide re-lending support at 100% of the loan principal. The initial re-lending amount is 300 billion yuan, the interest rate is set at 1.75%, the term is 1 year, and it can be extended depending on the situation, with a cumulative term of up to 3 years.

Large-scale repurchases by listed companies in China and Hong Kong

After the (Notice) was implemented, China's state-owned banks took quick action and began to collect financing demand amounts and time arrangements from listed companies interested in participating, and stated that they would "immediately organize applications for credit." According to public information, as of yesterday (20), more than 20 listed companies in Shanghai and Shenzhen have issued announcements stating that they have obtained loans and will repurchase stocks on a large scale, involving a total amount of more than 10 billion yuan, marking the official implementation of the first batch of repurchase and increase cases.

Specifically, the first batch of listed companies participating in the repurchase and increase of loans include Sinopec, China Merchants Shekou, China Merchants Energy Shipping, China Merchants Port, COSCO Shipping, COSCO Shipping Development, China Guangdian Measurement, Maxsun Technology, GigaDevice, VMAX, Jiahua Energy, Wen's Foodstuffs, Fusai Technology, Sungrow Power Supply, Shanying International, Tongyu Heavy Industry, Muyuan Foodstuff, China National Foreign Trade Transportation Corporation, COSCO Shipping Energy, COSCO Shipping Technology, Dosin Technology, Lino Glass, and Linglong Tire, etc.

In the Hong Kong stock market, industry giants such as Tencent Holdings (00700), HSBC Holdings (00005), AIA Group (01299), and Meituan-W (03690) also frequently carry out large-scale repurchases.

This policy allows companies to obtain loans at lower interest rates, thereby repurchasing their own shares or increasing their holdings, thereby stabilizing share prices. This not only effectively alleviates the financial pressure on companies, but also sends a positive signal of healthy development to the market, which is conducive to attracting investors.

Chinese stocks rise

Encouraged by the news, China's stock market shook off its recent decline and rebounded since the 18th.

The Shanghai Composite Index rose from 3,164 points on the 18th to the current 3,284.16 points, an increase of nearly 4%; the Shenzhen Component Index rose 7% to 10530.51 points; and the ChiNext Index rose 10.5% to 2,234.35 points.

On the 10th, the People's Bank of China also announced the implementation of a new mechanism for "Securities, Funds, and Insurance Companies Swap Facilities", accepting applications from qualified securities, funds, and insurance companies, with an estimated initial operation scale of RMB 500 billion. This new policy allows financial institutions to mortgage assets with poor liquidity (bonds, stock ETFs, CSI 300 constituent stocks, etc.) and obtain assets with better liquidity (government bonds, central bank bills, etc.) from the People's Bank of China, which is conducive to further investment in the market.

China's stock market has ushered in incremental funds under these two new policies. Whether they can continue to stimulate market growth remains to be seen.