China’s central bank and two regulators will lower the relending rate for share-buyback loans to 1% from 1.25% and broaden market-support tools after October’s sharp stock decline.
The People’s Bank of China (PBOC), National Financial Regulatory Administration (NFRA) and China Securities Regulatory Commission (CSRC) said Monday the lending program will become a long-term institutional arrangement. Banks will price loans commercially, with a markup over the PBOC’s relending rate, the regulators said.
The regulators also plan to add participants to the Securities, Funds and Insurance Companies Swap Facility (SFISF), moderately lower its fees and adjust collateral and operating rules. Eligible securities firms, funds and insurers can pledge assets such as bonds and stock exchange-traded funds (ETFs) in return for high-grade liquid assets. Funds obtained through the facility are restricted to stock and ETF investments and market-making.
The PBOC scheduled the third SFISF operation for Nov. 3. Thirty-one securities and fund companies were approved and applied for quotas totaling more than 100 billion yuan. The swap has a one-year term and may be extended if conditions warrant. The quota applications do not represent a final allocation.
By the end of October, 28 securities and fund companies had participated in the first two rounds, totaling 105 billion yuan, the CSRC said. It also reported that 902 listed companies had disclosed 1,110 loan announcements for buybacks or increased shareholdings.
The CSRC aims to bring more major index constituents and leading technology companies into the buyback lending program. It plans to propose adding a share price below a company’s initial public offering price as a trigger for market-support buybacks, after further study. The regulator also plans to review margin-financing controls after balances and trading activity declined.
The CSI 300 fell 8.5% in October, its steepest monthly decline since early 2016, Reuters reported. Reuters linked investor concerns to weak consumption, prolonged property-sector debt problems and falling technology shares. The next swap operation is scheduled for Nov. 3.
