The People’s Bank of China (PBOC) and multiple regulatory agencies have jointly launched the “Stock Repurchase and Increased Holding Re-loan” policy. The initial scale of the policy is 300 billion RMB, providing loans to qualified listed companies and major shareholders for stock repurchases and increased holdings. In less than three days, more than 20 A-share listed companies have announced their repurchase plans, involving funds exceeding tens of billions of RMB.
On the 18th, the PBOC, together with the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, issued the “Notice on the Establishment of Stock Repurchase and Increased Holding Re-loan,” announcing the establishment of the stock repurchase and increased holding re-loan to encourage financial institutions to provide loans to qualified listed companies and their major shareholders to support their stock repurchases and increased holdings. The loan interest rate is generally not higher than 2.25%.
According to the announcement by the PBOC, the stock repurchase and increased holding re-loan will be issued quarterly, and 21 nationwide financial institutions can provide relevant loans to qualified listed companies and major shareholders with a shareholding of over 5%. After financial institutions provide loans to listed companies, they can apply for re-loans from the central bank in the first month of the next quarter. The central bank will provide re-loan support equal to 100% of the loan principal for qualified loans. The initial quota for re-loans is 300 billion RMB, with an interest rate of 1.75% and a term of 1 year, which can be extended depending on the situation, with a cumulative term of up to 3 years.
After the implementation of the “Notice,” Chinese state-owned banks quickly took action and began collecting financing demand amounts and time schedules from listed companies interested in participating, stating that they will “immediately organize credit application.” According to public information, as of the 20th, more than 20 listed companies in the Shanghai and Shenzhen stock markets have announced that they have obtained loans and will engage in large-scale stock repurchases, involving a total amount of funds exceeding tens of billions of RMB, marking the formal implementation of the first batch of repurchase and increased holding cases.
Specifically, the first batch of listed companies participating in the repurchase and increased holding loans include Sinopec, China Merchants Shekou, China Merchants Shipping, China Merchants Port, COSCO SHIPPING Holdings, COSCO SHIPPING Development, Guangdong Electric Power Design Institute, Mindray, ZTE, Weimai, Jiahua Energy, Wens, Fosun International, Sunshine Power, Eagle International, Tongyu Heavy Industry, Muyuan, China COSCO Shipping, COSCO SHIPPING Energy, COSCO SHIPPING Specialized, SMIC, Lianrui Optoelectronics, and Linglong Tire, among others.
In the Hong Kong stock market, industry giants such as Tencent (00700), HSBC (00005), AIA Group (01299), and Meituan-W (03690) have also conducted large-scale repurchases.
This policy allows companies to obtain loans at lower interest rates to repurchase their own stocks or increase their holdings, thereby stabilizing stock prices. It not only effectively eases the funding pressure on enterprises but also sends a positive signal of healthy development to the market, which is conducive to attracting investors.
Chinese stock market rises
Inspired by this news, the Chinese stock market has rebounded from its recent decline since the 18th.
The Shanghai Composite Index has risen from 3,164 points on the 18th to the current 3,284.16 points, an increase of nearly 4%; the Shenzhen Component Index has increased by 7%, currently at 10,530.51 points; and the ChiNext Index has risen by 10.5%, currently at 2,234.35 points.
On the 10th, the PBOC also announced the implementation of the “Securities, Funds, and Insurance Companies Exchange Convenience” new mechanism, accepting applications from qualified securities, funds, and insurance companies. The initial operation scale is expected to be 500 billion RMB. This new policy allows financial institutions to exchange illiquid assets (bonds, stock ETFs, and constituent stocks of the SSE 300 Index, etc.) with more liquid assets (government bonds, central bank bills, etc.) from the central bank, facilitating further investment in the market.
Under these two new policies, the Chinese stock market has seen an increase in incremental funds. Whether it can continue to stimulate market growth is worth continuous attention.