China rolls out support measures to aid struggling stocks

Chinese regulators have introduced a series of measures to bolster the performance of the nation's capital markets, which have been struggling due to sluggish consumption, a prolonged property sector debt crisis, and a significant decline in tech stocks. The Beijing-based measures include conducting swap operations, upgrading a lending facility for stock buybacks, and encouraging index heavyweights and leading tech firms to stabilize their share prices.

These actions come after the benchmark CSI300 Index experienced a sharp 8.5% drop in October, marking its worst monthly performance since early 2016.

The People's Bank of China (PBOC) announced on Monday its intention to engage in swap operations with financial institutions on Tuesday, potentially injecting over 100 billion yuan (US$15 billion) into the stock market. This will be the third time the PBOC has employed this liquidity tool, which was developed two years ago to facilitate brokers, insurers, and fund companies in securing liquidity for stock purchases.

Additionally, the PBOC announced a reduction in the interest rate of an expanded lending scheme from 1.25% to 1%, making it a long-term mechanism.

In a separate development, the China Securities Regulatory Commission (CSRC) urged key index constituents and leading tech companies to actively buy back shares and stabilize market values. The CSRC also encouraged some newly established exchange-traded funds to rapidly build stock positions and motivate fund managers to invest in declining markets.

The central bank's commitment to maintaining capital market stability and fostering investor confidence was highlighted by Hao Zhou, a Hong Kong-based analyst at Guotai Haitong Securities. He noted that global volatility and external uncertainties continue to negatively impact investor sentiment.

Share prices rebounded on Monday in anticipation of supportive policies. The Shanghai Composite Index (.SSEC) rose by 1.1% on Monday, marking its largest single-day percentage gain since August 27.