Beijing fund buys China bank shares in show of support for stock market

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A Beijing-backed fund has increased its shareholdings in China’s four biggest banks, spurring hopes for further moves to boost sentiment towards the country’s ailing stock market.

The state-controlled Central Huijin fund invested more than Rmb477mn ($63mn) in China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China. Shares in the four lenders gained on Thursday, with those in CCB — the country’s second-largest lender by assets — up by as much as 3.6 per cent.

The investments by Central Huijin, already the main shareholder of the four banks, were the first such purchases for eight years and helped to lift the broader market.

China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed shares was up 0.5 per cent, while the Hang Seng China Enterprises index in Hong Kong rose almost 2 per cent.

The move comes as Beijing is trying to shore up confidence in the economy and financial sector after a sluggish post-Covid rebound and a prolonged liquidity crisis among property developers. China’s CSI 300 index has shed more than 5 per cent this year amid fragile investor confidence in the world’s second-largest economy.

Central Huijin, established in 2003, is now a unit of the $1.4tn China Investment Corporation sovereign wealth fund and is intended to be the main shareholder for China’s state-owned financial institutions. It will continue to buy into the four state banks in the next six months, according to exchange filings by the four lenders on Wednesday.

“China ADRs traded in the US have already reacted positively overnight upon the news,” said Hong Hao, chief economist at a Shanghai-based hedge fund Grow Investment. “Even as a financial investment, the fund will likely profit from its recent increase of stakes in banks due to their relative low valuation.”

China’s finance ministry said in August that it would halve its stamp duty on stock trades in order to “invigorate capital markets and boost investor confidence”, but the gains spurred by that move quickly faded.

“Beijing wants to show the foreign investors who have been selling out of China stocks for months that they will support the market,” said Louis Tse, an independent analyst and expert on Chinese markets. “But I’m still worried that this won’t be enough to shift sentiment.”

Central Huijin is often seen by investors as a buyer of last resort in the Chinese stock market. Its purchases of state bank shares in 2015 came during a broad market meltdown.