China stocks rise as regulators meet on market support; Huafa concerns weigh on bonds
China's blue-chip CSI300 Index rose about 0.5% in early trade on Monday after the central bank and securities watchdog were due to meet brokerages and fund managers to discuss the use of policy tools to support capital markets, according to Token Times. The gain follows an 8.5% slump in October, the index's worst monthly performance in more than a decade, as a selloff in technology stocks weighed on sentiment. The Shanghai Composite Index climbed 0.3%.
The discussions go beyond equities. The People's Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission and major banks were also set to discuss optimising relending facilities for share buybacks and purchases, according to Token Times. The details of any support measures, and whether they materialise, were not disclosed.
Against that backdrop, concerns over Zhuhai Huafa Group, a state-backed conglomerate with interests ranging from real estate to investment, continued to weigh on its listed units and on bond funds. Huafa Properties, Advanced Fiber and Weiyue Group all continued to slide in early trade. Investors remain focused on Huafa after reports last week that it failed to repay two maturing trust products and was seeking extensions on some bank loans.
The strain has reached fixed income. Exchange-traded funds tracking bonds remained under selling pressure after signs of heavy redemptions last Friday, and a listed fund that invests in 30-year Treasuries fell 0.3% in early trade after slumping nearly 1% on Friday. Hedge fund manager iFund Asset Management said in a note to clients that the liquidity squeeze around Huafa "has transmitted to bond funds, with some funds forced to trade at a discount."
Expectations of a sweeping rescue remain muted. UBS economist Yu Song said in a note to clients that "the likelihood of a broad-based stimulus package like the one in September 2024 remains low."
