Media Perspective｜The Strongest-ever A-share Market-stabilizing Package Comes Out

① China launched its own version of stabilization fund to reassure the market;

② State ministries acted together and joined hands with market institutions;

③ This is the strongest market stabilizing package throughout the history of A-shares, signaling clear strategies and road maps.

Cailian Press, April 9 – Trump's tariff policies have caused sharp volatility in global risk assets, dealing a blow to both A-shares and Hong Kong stocks. It was at such a critical timing that a package of market stabilizing measures were introduced.

The strategy is clear: the state ministries and commissions took joint actions with firm support from all types of market institutions. They worked together to buy into A-share market and show a strong signal of confidence in China's economy, China's assets, and the investment value of A-shares.

The Chinese version of market stabilization fund, led by Central Huijin, has undoubtedly lifted market sentiment by decisively increasing its holdings in A-shares.

People's Bank of China (PBoC), the social security fund, State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and local state-owned entities have also vowed to maintain market stability. China Chengtong, China Reform, China Electronics Technology, and PetroChina have all announced plans to increase their shareholdings. The market sees it as a proactive, swift and effective collaboration between the authorities, the financial firms, and the listed companies through a mix of policies to provide safety net to the market.

In just two trading days, the market made a sharp turn from tariff-derived panic sales to rational pricing, as is seen in the upturn in Mainland and HongKong shares and the quick release of a series of policies. From Central Huijin's call for action at the end of April 7 to the stabilization of the market on April 8, what happened in just over 20 hours? What is the pace of policy introduction? How was the market sentiment turned around? How do professional institutions view this market stabilizing action? Let's learn about immediate overview from the heads and chief executives of securities companies.

Action 1: Joint action by the "national team", the PBoC, National Financial Regulatory Administration (NFRA) and the SASAC

Throughout the day on April 8, a great number of market stabilizing policies across ministries with wide participation at multiple levels were quickly released, with news coming out at a pace of almost every hour.

Starting from the early morning of the day, China Reform Holdings Corporation Ltd. announced that its subsidiary, China Reform Investment Co., Ltd., would increase its holdings by an initial amount of 80 billion yuan of central SOE stocks, high-tech and innovative stocks and ETFs, by means of PBoC special lending facility for stock buybacks and shareholding increase. At 6:30 a.m., China Reform released the above news again on its official WeChat account.

Before the market opened in the morning, Central Huijin, the PBoC, the NFRA and other regulators rolled out a number of policies and called for quick action, covering a variety of medium- and long-term funds such as the "national team" and insurance funds.

At 8:30 a.m., a relevant person in charge at Central Huijin said that the company is a member of the "national team" in the capital market that plays a role similar to a stabilization fund. The company vowed to firmly increase holdings of ETFs of various market styles, to buy at a larger scale and with a balanced distribution across asset types.

At the same time, the NFRA issued the Notice on Matters Concerning the Adjustment of Regulatory Proportion of Equity Assets in Insurance Funds to adjust the regulatory requirement on the proportion of equity assets allowed to be held by insurance funds and enhance support for the capital market and the real economy. The tiered standards are simplified to allow 5% more equity holding by funds meeting several tiers of solvency ratios. This will broaden the scope of equity investment and increase equity capital to support the real economy.

In terms of the PBoC lending facility, China Chengtong followed China Reform to announce that it planed to increase its holdings of listed companies' shares with 100 billion yuan from the lending facility for stock buybacks and shareholding increase.

As for central SOEs, China Merchants Group took the lead in the action. Its 7 listed companies, including China Merchants Shekou Industrial Zone Holdings Co., Ltd., China Merchants Port Group Co., Ltd., China Merchants Energy Shipping Co., Ltd., China Merchants Expressway Network & Technology Holdings Co., Ltd., Sinotrans Limited, Liaoning Port Co., Ltd. and China Merchants Property Operation & Service Co., Ltd., all announced before market opening that they would accelerate their share buyback plans based on firm confidence in the company's future prospects and high recognition of its intrinsic value.

As the opening approached, the PBoC expressed its firm support for Central Huijin to step up buying stock market index funds and would provide sufficient lending support to the company if necessary, in a bid to resolutely maintain the smooth operation of the capital market.

When the market opened in the afternoon, around 2 p.m., the SASAC stated that it would fully support central SOEs and their listed companies to proactively scale up their shareholding increase and share repurchase efforts. The central SOEs were called on to fully fulfill their responsibility to effectively safeguard the rights and interests of all shareholders, reinforce market confidence in their listed companies, and enhance corporate value.

Additionally, more guidance should be given to central SOEs to properly manage their market capitalization, and keep on developing for investors high-quality, responsible, well-performing, compliant, and sustainable assets suitable for value investment, contributing to the healthy and stable development of the capital market.

Subsequently, local state-owned capital investment platforms also voiced strong support for China's capital markets. Three major state-owned investment platforms in Shanghai issued statements expressing firm confidence in the long-term prospects of China's capital markets.

Action 2: Buying the market first by the "national team" and followed by market institutions "acting in concert"

With favorable policies in place, strong inflow was recorded from medium- and long-term funds such as the "national team", social security fund, insurance funds, bank wealth management subsidiaries, public and private funds, and listed companies to support the market.

First is the "national team + PBoC lending facility". Central Huijin, China Chengtong and China Reform all announced on April 7 to buy ETFs, central SOE stocks and high-tech and innovative stocks in significant quantity, and will continue to increase their holdings. On April 8, China Chengtong announced to increase its holdings of listed companies' shares with the 100 billion yuan from the lending facility for stock repurchases and shareholding increase. After buying stock assets on April 7, China Chengtong continued to increase its holdings in ETFs and central SOEs' listed shares by a large amount to promote the stable operation of the capital market.

Second is the social security fund. On April 8, China's social security fund stated that it had taken the initiative to increase holdings of domestic stocks and would continue to do so in the near future.

Third is insurance funds. After the NFRA adjusted the allowed percentage of equity assets in insurance funds, China Pacific Insurance took the lead in announcing that it had increased its holdings of broad-based ETFs and other products on April 7, and would further leverage its advantage of long-term investment to step up buying strategic emerging industries, advanced manufacturing, new infrastructure and other fields, and hold more high-quality assets representing China's future economy, in a bid to serve the development of new quality productive forces.

Fourth is banks. It is worth noting that banks' wealth management subsidiaries have also increased their holdings. Suyin Wealth Management issued an announcement that it had increased its holdings in ETFs and would give full play to the role of patient capital and long-term capital, making contributions as the wealth management industry to the stable and healthy development of China's capital market. In the evening, Postal Savings Bank of China, Bank of Chengdu and China Everbright Bank announced that they had received shareholders' notice of holding increases or disclosed plans to increase their holdings. China Zheshang Bank stated that its directors, supervisors and senior executives planned to increase their holdings collectively.

Fifth is public funds. Bosera Funds, Pengyang AMC and China Merchants Fund announced to buy their own products on the same day, with a total amount of 145 million yuan. Bosera Funds would use its own capital totaling 65 million yuan to invest in its equity public funds, and China Merchants Fund would use its own capital totaling 50 million yuan to buy its stock and hybrid public funds, and has promised to hold them for at least 1 year. Pengyang AMC announced to subscribe for 30 million yuan of the company's active equity stock-oriented public funds under management with its own funds. The first 15 million yuan subscription was completed on April 8, and the remaining promised amount of 15 million yuan will be completed and announced in the near future.

Sixth is private funds. Media reports show that private equity firms including Springs Capital, Beijing StarRock Investment Management Co., Ltd., and Shennong Capital have recently called for more attention to the certainty of corporate fundamentals after the geopolitical noise winds down. Wang Yiping, CEO and Chief Investment Officer of Hainan Evolution Asset Management Co., Ltd., posted on social media that it had turned fully invested on April 8.

Seventh is listed companies. Positive announcements ran throughout the day from SOEs and central SOEs on shareholding increase, repurchases, dividends, etc. According to SSE data, as of 8:00 p.m. on April 8, within the previous 24 hours, a total of 32 SSE-listed companies disclosed new buyback plans, with an amount of 5.185-9.77 billion yuan. 33 companies increased their holdings, with an amount of 11.614-21.65 billion yuan. CHN Energy, China Coal Energy, China Energy Engineering, CNOOC, State Development and Investment Group and other central SOEs all announced to increase their holdings.

Action 3: Swift action to repurchase and increase holdings by securities companies and listed companies

The securities and fund management industry worked closely with the "national team", the social security fund, insurance funds, and listed companies. A legion of securities firms also boosted confidence through repurchases and increased holdings.

So far, companies including Orient Securities, Guotai Haitong Securities, Sinolink Securities, SDIC Capital, the parent company of SDIC Securities, and Huaneng Capital, the controlling shareholder of Great Wall Securities, have taken action. The first four companies started to repurchase, and the latter announced to increase its holdings. It is worth noting that repurchases at high premium of more than 40% to 150% have become the biggest feature of brokerage repurchases.

Specifically, Orient Securities proposed to make 250 million to 500 million yuan repurchase of the company's A-shares at a price of no more than 12 yuan per share. The repurchase price is 41.84% higher than the previous day's closing.

Guotai Haitong Securities Chairman Zhu Jian proposed to use 1 billion to 2 billion yuan to repurchase the company's shares at a price no higher than 1.5 times the average price in the 30 trading days preceding the resolution.

SDIC Securities' parent company, SDIC Capital, proposed to repurchase shares of 200 million to 400 million yuan at a price no higher than 1.5 times the average price in the 30 trading days preceding the resolution.

Sinolink Securities would repurchase 50 million to 100 million yuan of shares, with the upper limit of the repurchase price exceeding April 8's closing price by 67.01%;

Great Wall Securities's controlling shareholder Huaneng Capital proposed to increase its holdings by a minimum of 50 million yuan and a maximum of 100 million yuan, without specifying a price range.

In addition to significant capital announced for repurchases and shareholding increase, on April 8, the SSE held a special symposium with securities firms, and had in-depth discussion with representatives from 10 securities firms including Changjiang Securities, Orient Securities, Soochow Securities, GF Securities, Guolian Minsheng, Guotai Haitong, Shenwan Hongyuan, Tianfeng Securities, Industrial Securities, and CITIC Securities, and fully listened to their opinions and suggestions.

All participating institutions expressed their firm optimism regarding the prospects for China's capital markets. In the face of an increasingly uncertain market environment, it is imperative to remain confident and united, maintain strategic focus, and concentrate efforts on their own business while working together to promote the healthy and stable development of the capital market.

According to incomplete statistics, as of after-hours trading on April 8, 22 A-share listed companies including CNOOC, Three Gorges Renewables, Luxshare Precision, CHALCO, COSCO Shipping Holdings, WuXi AppTec, Sichuan Chuantou Energy, Wuliangye, Hengli Petrochemical, TCL Technology, NHU, Chint Electrics, Dahua, Xianhe, China Oilfield Services, Offshore Oil Engineering, HGTECH, Hongrun Construction, COSCO Shipping Development, Guoxin Micro, Shenzhen YUTO Packaging Technology, Autel Intelligent Technology and DSBJ disclosed after-hours announcements on share repurchase or holdings increase plans with a maximum amount of 200 million yuan or more.

Action 4: Supporting voice from top securities firms and across the industry

Faced with the tariff shock, in just over 30 hours following Central Huijin’s announcement to increase ETF holdings at the end of April 8, a large number of actions have been quickly taken, including rule changes from regulators, directly buying the market by the "national team", and more importantly, spontaneous moves by market participants. In the view of Luo Zhiheng, Chief Economist of Yuekai Securities, the current policy combination forms a joint force of government and market and takes into account both short-term timeliness and long-term standardization. This not only shows that funds from all parties have affirmed the long-term value of A shares, but also demonstrates the determination of decision-makers to stabilize the capital market.

It has become a consensus to increase investment in the A-share market, with full confidence in China's economic development and firm optimism about the prospects of China's capital market.

Zhang Youjun, Party Secretary and Chairman of CITIC Securities, said that in the face of the current market environment with increasing uncertainties, we must strengthen our confidence and maintain our determination. The Party Central Committee attaches great importance to the reform and development of the capital market. A series of comprehensive reforms in the capital market have been deepened, and a package of targeted incremental policies has continued to exert their strength. This has effectively boosted the confidence of domestic and foreign investors in the A-share market. CITIC Securities will actively fulfill its responsibilities, work hand in hand with all parties in the market, increase medium- and long-term capital investment through various means, strive to enhance the investment value of listed companies, and contribute to the stable development of the capital market.

Huatai Securities CEO Zhou Yi also said that short-term volatility does not change the long-term trend. The innovative spirit of Chinese technology companies, the strong resilience of China's industrial and supply chains and the broad demand of China's domestic market are the greatest confidence and important support for the stable and positive trend in the capital market. As a firm practitioner of long-termism, Huatai Securities has always firmly supported the real economy, acted as a good companion to strategic emerging industries in their quick growth, fully played the role of patient capital and long-term capital, and contributed to the high-quality development of China's capital market.

Li Qiusuo, Chief Domestic Strategy Analyst at the CICC, believes that though US tariffs will bring challenges to the Chinese economy, the Chinese stock market has many favorable conditions, including changes in geopolitical narratives, as well as the valuation advantages of Chinese assets and space for impactful macroeconomic policies. Overall, China's stock market remains relatively resilient in the short and medium term, and "China's asset revaluation" is still ongoing.

In the view of Gao Ruidong, Chief Economist of Everbright Securities, this cross-departmental and cross-level response not only demonstrates the ability of medium- and long-term capital to adjust to short-term irrational market fluctuation under regulatory guidance, but also highlights the increased level of maturity of China's capital market in responding to external challenges, marking that the coordinated efforts of policy support and market mechanisms have entered a new stage.

Gao Ruidong said that the proactive actions by China's version of the stabilization fund are reshaping the market ecology. Through timely and effective market mediation, it guides medium- and long-term funds such as social security and insurance to the market in an orderly manner, promotes the stabilization mechanism to transform from "short-term support" to "long-term market shaping", provides sufficient buffer space for the A-share market to resist external disturbances, and also conveys sufficient confidence to the world with its strategic determination of "opening up to respond to protectionism".

Fu Jingtao, Chief Strategy Analyst at Shenwan Hongyuan, believes that domestic policies are in full readiness, the expectation of the capital market being stabilized turns higher, and the efforts to maintain the capital market continue to grow. All this has enabled the market to get rid of pessimism in a timely manner. After quickly clearing the disturbance to fundamentals caused by Trump's tariff impact in the short term, the A-share market is expected to effectively respond to marginal improvements and long-term positive factors.

Li Huaijun, a macro analyst at First Capital Securities, believes that Central Huijin has increased its holdings of A-share index funds, while the PBoC announced to provide sufficient lending support to Central Huijin when necessary. The combination of investment by Central Huijin and unlimited liquidity support by the PBoC marks the establishment of Chinese version of the stabilization fund, which will help ease market concerns, boost market confidence, and create favorable conditions for the steady recovery of the A-share market.

Action 5: Statement from Foreign public funds on optimism abut the long-term investment opportunities of Chinese assets

JPMorgan Asset Management believes that the current A-share market foundation remains solid from the perspectives of policy, capital, investor sentiment and other factors. Once fully reacting to the slew of risks, the market is expected to regain its upward trend. JPMorgan Asset Management remains optimistic about the long-term investment opportunities of Chinese assets. On macro level, China is at the starting point of a cyclical recovery, and Trump's tariff policy poses challenges to the global trade pattern. Under increasing export pressure, policies to stabilize growth and stimulate domestic demand are expected to come out earlier than the market had previously expected, which may bring marginal ease to the impact of tariffs on the economy. At the micro level, technological independence, "domestic circulation, stable growth", and expanding opening up to non-US regions may be opportunities that investors can pay attention to.

The Morgan Stanley Investment Management China pointed out that in the long run, the United States' extreme pressure on its trading partners is not normal. Companies will find ways to suit their own profit models in international trade, and China will still bring cost-effective products with its strong manufacturing capabilities. In this systematic market decline, there are many wrongly affected assets. Those high-quality companies with hardly impacted fundamentals, strong operating capabilities and stable business models, which dropped sharply in price due to market sentiment, deserve more attention.

Manulife Fund believes that the game between China and the United States will go on for a long term, and severe tariffs are means of competition. The short-term impact of high tariffs should not be underestimated, but the long-term strategic opportunities implied for investors should not be underestimated either. Three medium- and long-term trends are showing window of opportunities:

First, the period for strategically optimizing China's international circulation pattern has come. China has deeply engaged in the urbanization process of countries along the Belt and Road initiative. China-EU cooperation is a strong path against severe tariffs. Those are all potential sources of growth in international demand.

Second, domestic demand will be stimulated to support China's economy. Policies will focus on tapping the potential of the resident sector. High-quality enterprises may also shift their focus on finding sources of demand to the domestic market. The development of new paradigm for aggregate economic operation may be accelerated.

Third, the trend in technology industry has become the key to China's transformation and development in the competition between China and the United States. It is time to restart investment in these trends in technology industry.

In addition, in response to Trump's list of U.S. requests such as "reshoring manufacturing", Wang Yi, Director of the Quantitative Investment Department at CSOP Asset Management, stated that the tariff policy will not turn manufacturing back to the U.S. in the short term (for example, 1-2 years). Businesses will still be looking for new destinations to operate around the world, but costs will rise. If the U.S. economy falls into recession, tariff revenues may not be enough to offset the increase in spending. So far, it seems that no economy or risky assets have really benefited from this tariff policy.