China makes buyback lending permanent as CSI 300 posts worst month in a decade
China's central bank is making cheap money for share buybacks a permanent fixture and widening its swap facility for securities firms, funds and insurers, after the CSI 300 Index fell 8.5% in October - its worst monthly decline in more than a decade - and dropped for a record 12 straight weeks through Friday.
The People's Bank of China said it would cut the rate on its relending facility for share buybacks and stake increases to 1% from 1.25%, make the programme permanent and encourage banks to lend more under it. It will also run operations under its swap facility when appropriate, raise the number of participating institutions and moderately lower swap fees, the central bank said after a meeting with financial regulators and institutions.
Both tools date from October 2024, when Beijing moved to shore up the stock market. The relending facility gives banks low-cost central bank funding for loans that finance buybacks and stake purchases by listed companies and major shareholders. About 440 billion yuan of such loans have been contracted and more than 280 billion yuan disbursed, according to the PBOC, while the swap facility's outstanding balance stands at 105 billion yuan.
The China Securities Regulatory Commission said a third round of swap operations would begin in the coming days, with 31 securities and fund firms approved to take part and applying for more than 100 billion yuan of quotas. The regulator plans to widen the relending programme, including by drawing in more major index constituents and leading technology companies, and to ease buyback rules - allowing companies to repurchase shares when their stock falls below the IPO price, and requiring firms holding excess fundraising proceeds to buy back stock when market support conditions are triggered. It will also study changes to margin-financing requirements to moderately increase financing capacity and improve liquidity.
The meeting drew 23 securities firms and funds and 26 banks, the PBOC said, with representatives of China International Capital Corp, Guotai Haitong Securities Co, Citic Securities Co, Industrial & Commercial Bank of China Ltd, China Construction Bank Corp and China Citic Bank Corp among those who spoke. The measures land amid a weak economy and doubts over artificial intelligence earnings that have kept Chinese shares under pressure since the summer.
