China’s state-owned funds buy back shares to halt declines | MUNDO

Chinese state funds intervened in the stock market on Tuesday, helping the benchmark index recover from its biggest intraday drop since August 2021.

The CSI 300 index closed down 0.6% at the close, trimming an earlier drop of 2.4%. State funds entered the market to buy local stocks during the afternoon session, according to two people with direct knowledge, who asked not to be identified because it was a private matter.

Meanwhile, U.S.-listed Chinese stocks were rising in premarket trading, led by large-cap technology companies, including Alibaba Group Holding Ltd. and JD.com Inc.

The move by state funds was aimed at stemming declines, according to one of the sources. Financial stocks, including brokerages, were among those bought, the person said. Sub-indices of cyclical sectors, such as energy, utilities and financials, posted gains in Tuesday’s session, although the benchmark index closed lower.

The sources cited did not provide information on the amount bought or the frequency of such purchases. The China Securities Regulatory Commission did not respond to a fax seeking comment.

The support from state funds, known as the “national team” of Chinacame at a time when mainland China’s benchmark index looked set to erase Monday’s gains as local markets opened after the week-long Lunar New Year holiday. The index sank into a bear market before the break as concerns about the weak economy and property sector debt problems outweighed Beijing’s monetary easing, and efforts by the securities regulator, state media and mutual funds failed to improve sentiment.

Historically, Beijing has supported markets when necessary around important events or dates. For example, The funds intervened to stop a market decline during the National People’s Congress in March last year.

Mainland stocks are off to a weak start in 2022, as the divergence in monetary policy between Beijing and Washington, considered one of the main reasons why stockbrokers around the world have become bullish on Chinese equities, has yet to translate into meaningful gains. Even last month’s cut in a key interest rate has failed to excite local traders, and the CSI 300 is down 6.7% year-to-date.

The drop in the index early Tuesday was due to concerns about consumer spending, as economic trends during the holiday break, which usually spurs spending and travel, disappointed investors. Although the Chinese traveled more compared to last year, the pandemic and restrictions to control outbreaks hurt domestic tourism spending, which fell from the already low level of 2021.

Consumer spending has to pick up for China to start “behaving pretty well versus the rest of the world,” Sean Taylor, chief investment officer for Asia-Pacific at DWS, said on Bloomberg Television. For now, people will want to put the Olympics behind them and look for more government guidance on stimulus, he added.

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