China kicks off 800 billion yuan funding schemes to support stock market

CHINA’S central bank kicked off two funding schemes on Friday (Oct 18) that will initially pump 800 billion yuan (S$147.6 billion) into the stock market through newly-created monetary policy tools.

The People’s Bank of China (PBOC) spelt out operational details of the swap and re-lending schemes first announced in late September, aiming to support “steady development” of capital markets.

China’s recent market bull run has been losing steam as euphoria turned into caution over the size and implementation of Beijing’s stimulus promises.

Under the swap scheme, initially worth 500 billion yuan, brokerages, funds management firms and insurers can obtain liquidity from the central bank through asset collateralisation to buy stocks.

Currently, 20 companies have been approved to participate in the scheme and initial applications have exceeded 200 billion yuan, the PBOC said.

The central bank also launched a re-lending programme, initially worth 300 billion yuan, that would allow financial institutions to borrow from the PBOC to fund share purchases by listed companies or their major shareholders.

The one-year interest rate for re-lending is set at 1.75 per cent, and 21 eligible financial institutions can apply for the loans at the start of each quarter, the PBOC said.

The announcements came after China’s financial regulators held a meeting with key financial institutions, urging them to swiftly implement expansive policies to support the economy and capital markets. REUTERS