Beijing moves to steady A-share market after sharp tech sell-off

In a bid to bolster confidence in the domestic A-share market, China's chief securities regulator convened a symposium over the weekend. This move came in the wake of a significant sell-off in technology shares, driven by apprehensions over U.S. sanctions. The China Securities Regulatory Commission (CSRC) gathered executives from listed companies, securities firm officials, and fund managers in Beijing to discuss the state of the country's capital markets and overall financial conditions.

The meeting, chaired by CSRC chairman Wu Qing, aimed to gather input on the current market environment.

The market correction was evident in China's CSI 300 Index, which plummeted 12% in the third quarter, primarily due to a 31% drop in the tech-heavy Star Market 50 index. The downturn persisted after the National Day holiday, with intraday trading on Friday seeing the ChiNext Index dip below the 3,000-point mark. The Star 50 index also declined by more than 4%, falling below the 1,400-point threshold.

However, both indices managed to rebound, closing slightly higher due to heavy buying, which some attributed to government-supported funds.

This is not the first such symposium this year. Following a sharp market correction in July, Wu Qing chaired a similar meeting with investors to bolster confidence. Since then, markets have stabilized, supported by policy measures and fresh capital inflows. The official statement following Saturday's symposium did not outline any new policy measures. Wu Qing encouraged listed companies and industry institutions to share suggestions and collaborate to enhance the capital market and deliver better returns to investors.

Experts participating in the symposium proposed several measures, including strengthening market stabilisation mechanisms, broadening channels for medium- and long-term funds, and developing "patient capital" for longer-term investments. They also advocated for eligible listed companies to increase dividends and share buybacks, improve investor protection, optimize listing rules, strengthen trading supervision, and enhance cross-border risk monitoring.

The regulatory push coincided with signs that global active funds were ending a four-year underweight position on Chinese equities, with institutions like Bank of America indicating a shift towards benchmark-neutral allocations.

However, Chinese investment banks warned of a challenging fourth quarter for mainland and Hong Kong equities, citing persistent concerns over higher U.S. interest rates, tight global liquidity, and a shifting sentiment towards artificial intelligence-related stocks. Analysts expect the market to remain range-bound amid these ongoing uncertainties.