Mainland bourses rebound following CSRC statement

▶ Stock buyback plans exert instantaneous impact: expert

Chinese mainland stock dropped sharply in the morning session on Tuesday but quickly rebounded and closed higher thanks to government supporting efforts.

The reversal came as China’s securities watchdog rolled out a statement that encourages stock repurchase and investment of mid-term & long-term capital, while asserting that the government will further relax restrictions on securities trading.

“The CSRC’s statement has people’s mind at ease,” Yang Delong, chief economist of First Seafront Fund, told the Global Times on Tuesday.

The Shanghai market opened at 2,538.57 points and quickly slumped to 2,522 points and then climbed to 2,572 points by 11:08 am. The bourse ended at 2,568 points on Tuesday, up by 1.02 percent.

The Shenzhen bourse underwent a similar volatility, slumping in the first half hour after opening and then rebounded in the next 30 minutes. The Shenzhen Component Index closed at 7,375 points on Tuesday, up by 0.72 percent.

The market rebound came as the China Securities Regulatory Commission (CSRC) published a statement on its official website on Tuesday morning, saying that it would create conditions to facilitate listed companies to conduct stock buybacks, the statement noted.

“This is exerting an instantaneous impact on the stock prices,” said Dong Dengxin, director of the Wuhan University of Science and Technology’s Finance and Securities Institute.

According to Dong, to date hundreds of Chinese listed companies have disclosed their stock repurchase plans, but many of those plans are smallscale and are deemed by investors as a kind of reluctant gesture to rescue a bearish market.

On Monday, Ping An Insurance (Group) Company announced that the company would repurchase its shares with a total amount of about 10 percent of its entire capital stock, which amounted to about 110 billion yuan ($15.8 billion).

“Ping An’s action is sending a clear signal to the market that listed companies will start large-scale stock repurchase programs, which would help increase market liquidity to a great extent,” Dong said.

The CSRC will also encourage “value investment,” allowing institutional investors including insurances, social security funds and securities investment funds to direct more incremental mid-term and long-term capital into the market.