China’s c. bank injects liquidity into stock market

China’s central bank initiated its first swap operations on Monday to support the stock market, exchanging assets worth 50 billion yuan ($7 billion) with 20 institutions, including brokerages, fund companies, and insurers.

The People’s Bank of China (PBC) set a fee rate of 20 basis points for the swap operations. This move is part of the PBC’s broader efforts to revitalise China’s stock market and economy.

“The swap scheme was set up with the sole purpose of improving market liquidity, as the funding can only be used to buy stocks,” said Wang Mengying, analyst at Nanhua Futures, expressing optimism about a potential rebound.

The swap scheme, valued at 500 billion yuan, allows brokerages, asset managers, and insurers to access funding by exchanging risk assets like stock ETFs and blue-chip stocks for liquid assets like treasury bonds and central bank bills.

The first wave of participants in the scheme includes prominent financial institutions like China International Capital Corp (CICC), CITIC Securities, China Asset Management Co, and E Fund Management Co.

Furthermore, over 20 listed companies, including China Petroleum and Chemical Corp (Sinopec) and China Merchants Port Group, have already announced plans to utilise another newly-established funding scheme.

Attribution: Reuters

Subediting: Y.Yasser