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CHINA: Issuance of CNY2tn of Special Purpose Bonds Urged by Think Tank. 

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets
  • A key government associated think tank (affiliated with the State Council, China’s cabinet) has suggested that up to CNY2 trillion of special government bonds should be issued for the creation of a market stabilization fund (per BBG).
  • The purpose of the fund would be to promote market stability via active participation in (primarily) equity markets.
  • This proposal would run alongside the PBOC’s re-lending facility that allows companies to draw on the swap line for the purposes of buybacks.
  • On the back of a range of stimulus measures announced in September, and following several years of relatively poor performance, China equities performance had been strong until the last week.
  • China’s Shanghai Composite is down over 5% from the early October peak and appears to be treading water for now.
  • However, even with the recent decline, the index remains up over 20% from the mid-September lows.
  • As news from the likes of the IMF show the reservations for China’s GDP growth, further stimulus measures may be required to preserve the equity performance and create a positive environment for growth.
  • The markets may also be awaiting fresh economic news to assess the stimulus impact. Outside of higher frequency updates on the property market etc, we get the Oct PMIs at the end of next week. 
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  • A key government associated think tank (affiliated with the State Council, China’s cabinet) has suggested that up to CNY2 trillion of special government bonds should be issued for the creation of a market stabilization fund (per BBG).
  • The purpose of the fund would be to promote market stability via active participation in (primarily) equity markets.
  • This proposal would run alongside the PBOC’s re-lending facility that allows companies to draw on the swap line for the purposes of buybacks.
  • On the back of a range of stimulus measures announced in September, and following several years of relatively poor performance, China equities performance had been strong until the last week.
  • China’s Shanghai Composite is down over 5% from the early October peak and appears to be treading water for now.
  • However, even with the recent decline, the index remains up over 20% from the mid-September lows.
  • As news from the likes of the IMF show the reservations for China’s GDP growth, further stimulus measures may be required to preserve the equity performance and create a positive environment for growth.
  • The markets may also be awaiting fresh economic news to assess the stimulus impact. Outside of higher frequency updates on the property market etc, we get the Oct PMIs at the end of next week.