China’s ‘national team’ buys US$57 billion of ETFs to buttress flagging stock market, UBS says
- Some 76 per cent of the funds were invested in ETFs tracking the underlying CSI 300 Index, while the rest went into ETFs linked to CSI’s small-cap indices
- Central Huijin Investment, one of entities of the national team, has broadened the scope of ETF purchases and will boost investments to maintain market stability
Chinese state buyers have bought a net 410 billion yuan (US$57 billion) of exchange-traded funds (ETFs) this year to shore up the nation’s US$9 trillion stock market, according to UBS Group.
Dubbed the “national team” by investors, the state players pumped 311 billion yuan, or 76 per cent of the funds, into ETFs tracking the underlying CSI 300 Index, with the rest funnelled into ETFs linked to CSI’s small-cap gauges, strategists led by Meng Lei said in a report on Tuesday. The Swiss bank came to the conclusion after parsing the daily transactions in 54 ETFs recently, it said.
The report sheds some light on the magnitude of direct state buying that has contributed to a rebound in the CSI 300 from a five-year low. Direct buying is part of the state drive to stem a market rout over the past three years that could jeopardise financial and social stability should sentiment deteriorate further.
The other rescue measures initiated by Beijing include installing a new chief of the securities watchdog, cracking down on quantitative trading by hedge funds and imposing fresh restrictions to curtail short selling.
“As a long-term investor, the ‘national team’ is very unlikely to reduce holdings in the near term,” the UBS report said. There is potential for further buying under extreme conditions, it added.
