Chinese shares rebounded pending the finance minister’s briefing

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Chinese shares rose in volatile trade on Thursday ahead of a weekend news conference by the country’s finance minister, as the central bank launched a facility to make it easier to buy shares.

The benchmark CSI 300 index rose nearly 3 percent on Thursday after falling 7 percent on Wednesday in its first loss in 11 straight sessions. Hong Kong’s Hang Seng index rose 4.2 percent after posting its biggest daily loss since 2008 on Tuesday and fell further on Wednesday.

The CSI 300 has risen more than 30 percent since the end of September after the Chinese government unveiled a stimulus package to revive economic confidence. The rally began to fade this week as investors began to question the government’s plan to boost the economy and its capital markets.

“Buying everything related to China has been what we’ve seen over the last couple of weeks,” said Richard Tang, China strategist and head of Hong Kong research at Julius Baer.

After several days of heavy gains, Tsang said the offshore market is moving into a second phase of the rally, “featuring slower gains, higher volatility, but with the fundamentals — earnings and valuations — back in focus.”

Thursday’s rebound came a day after Beijing announced a press briefing with Finance Minister Lan Fo’an on Saturday, fueling expectations that the government will announce more stimulus measures.

“The market is certainly looking for signs of policy support,” said Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas.

China’s central bank on Thursday moved forward with a scheme to allow domestic financial companies to buy more shares, a tool designed to stabilize the market and bolster liquidity.

The facility allows non-bank financial companies to borrow from the People’s Bank of China to buy shares, with bonds, stocks or exchange-traded funds serving as collateral.

The bank said it is accepting applications from eligible securities groups, funds and insurance companies to pledge ETFs, bonds or constituent stocks of the CSI 300 index for more liquid assets such as sovereign bonds and central bank notes.

The funds had to be invested in the stock exchange, the PBoC said.

The size of the 500 billion lei ($70 billion) facility “may expand depending on market conditions,” the bank said. The mechanism is designed to “enhance the inherent stability” and “promote the healthy development” of capital markets, it said.

Experts said the tool was similar to the US Federal Reserve’s Term Securities Lending Facility, which allowed dealers to borrow liquid assets such as treasuries for funding by pledging illiquid collateral such as bonds corporate.

It was created during the 2008 financial crisis and revived in 2020 during the pandemic.