(Yicai) Feb. 6 -- Stock market indexes on the Chinese mainland bounced back today, following a dismal start to the year, after an investment institution directly under the country’s cabinet pledged to substantially hike its holdings of exchange-traded funds to shore up a sluggish stock market and spur investor confidence.
Buoyed by the news, the Shanghai Composite Index climbed 3.2 percent to finish the day at 2,789.49, ending six consecutive days of declines. The Shenzhen Component Index jumped 6.2 percent to 8,460.38, while the Shenzhen bourse’s ChiNext Index surged 6.7 percent to 1,667.45.
Central Huijin Investment is fully aware of the current value of the mainland’s stock markets and will continue to expand the size of its ETFs to safeguard the stable operations of the capital market, said Central Huijin, which fulfils investor obligations for the central government.
Central Huijin’s commitment to buying more ETFs will stabilize the market and boost investor confidence, said Li Xunlei, chief economist at Zhongtai Securities.
The China Securities Regulatory Commission then issued a statement saying it firmly supports Central Huijin in increasing its holdings of ETFs. The securities watchdog will also guide more institutional investors such as mutual funds, securities companies and insurers to get involved in the markets, it added.
The People’s Bank of China and CSRC have issued a series of measures since the beginning of the year to steady the market and current market valuations are worthy of asset allocation, Li said.
The CSRC will further tighten regulations on securities lending, it added. Securities lending is a short-selling method whereby investors borrow stocks from brokerages to sell and then buy in the same amount of stock which they return to the brokerages and pay a commission.
The CRSC will suspend the newly-added refinancing of securities, require brokerages to better manage clients’ transactions and ban the completion of stock transactions the same day they are made through securities lending.
Editors: Dou Shicong, Kim Taylor