2023-08-28 17:27:11
China establishes dozens of retail funds to revive the market
China’s securities regulator has approved the launch of 37 retail funds, as part of the government’s efforts to revive financial markets that are struggling to get off the ground in a faltering economy.
The move comes on top of a series of measures to support the market, including lower stamp duty, slower pace of initial public offerings and lower margin financing requirements.
The newly approved funds, which will channel fresh capital into the market, include 10 exchange-traded funds that track the CSI 2000 index of small companies and seven technology-focused exchange-traded funds, the China Securities Regulatory Commission announced on its website.
The remaining 20 products are innovative mutual funds that charge investors for the first time variable fees, which are linked to fund size, performance or holding period.
The Securities and Exchange Commission has pledged to speed up approvals for ETFs, direct asset managers to reduce management and trading fees, among many other market-friendly measures.
China’s main CSI 300 index rose more than 5 percent at the open on Monday, but is still down nearly 6 percent from its peak in April, according to Archyde.com.
China’s leaders pledged late last month to boost investor confidence and revitalize the stock market – the second largest in the world – which was reeling from the emergence of threats to recovery after the epidemic, and the worsening debt crisis in the real estate market.
In an editorial on Monday, the official China Securities Journal said the latest support measures underscore the authorities’ determination to stabilize the capital market, whose proper functioning is essential to China’s economic recovery.
“A vibrant capital market is the key to stabilizing people’s expectations and increasing confidence,” the editorial said. “The decision-makers’ determination to revive the market and boost confidence should not be underestimated.”
Analysts at the Chinese Asset Management Company said, “The policy package sent a clear signal to boost investor confidence with the market bottoming out.” Analysts at BOC International said that “reducing stamp duty will directly benefit stock brokers,” as trading activity may increase after the reduction.
Stocks rose in most sectors on Monday, as shares rose about 3 percent, after jumping 10 percent at the open. Real estate stocks also increased 4 percent amid the latest measures to help stagnant real estate markets, including relaxing home loan rules and subsidizing affordable housing.
Beijing has taken a series of steps, including a smaller-than-expected cut in its main lending benchmark last week. But investors are still demanding a stronger policy response, including massive government spending.
Despite the latest confidence-boosting measure, foreign investors sold a net 8 billion yuan ($1.10 billion) of Chinese stocks through Monday, with 14 out of the previous 15 sessions seeing net sales.
Evergrande continues to dive
Despite the new measures, the shares of the troubled Chinese real estate giant, Evergrande, fell by nearly 80 percent in Hong Kong on Monday, after the suspension of trading in its shares for 17 months ended.
The resumption of trading came after the company said in a statement Friday that it had met the guidelines set by the exchange, including publishing its financial results, albeit late, and complying with other listing rules.
Evergrande, which was the largest real estate company in China, defaulted in 2021, and it was burdened with obligations of more than $300 billion, which made it a symbol of the real estate sector crisis in China, whose repercussions on the sector are feared globally.
The company’s shares fell by as much as 87 percent during morning trading, which reduced its market value to less than $600 million, after it reached more than $50 billion in 2017. The company ended Monday’s trading down 79.4 percent.
On Sunday, the company announced new losses in the first half of the year amounting to 33 billion yuan ($4.53 billion), an improvement over losses of 66.4 billion yuan recorded in the same period last year. But its cash assets fell from $2 billion last year to $556 million, reflecting its dwindling liquidity.
Evergrande said China’s real estate market “slowed significantly” in the first six months of the year and saw new defaults in the sector, “further exacerbating volatility in the market.”
Evergrande was supposed to hold meetings of the two creditors regarding the proposal to restructure its foreign debts, but in the afternoon it announced the postponement of the meetings, only hours before it was scheduled to take place. The company said in a filing to the stock exchange that the delay of about a month would allow creditors to “consider, understand and evaluate the plan.”
The “Evergrand” plan provides creditors with the option to exchange their debts for new securities issued by the company, and shares in two of its subsidiaries, the “Evergrand” group for real estate services and the “Evergrand” group for new energy vehicles.
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