MNI BRIEF: PBOC Eyes Stock Market Stabilisation Tools

MNI (BEIJING) - The People’s Bank of China will look to create two new targeted tools to help stabilise the stock market, an unprecedented move by the central bank, PBOC Governor Pan Gongsheng told reporters on Tuesday.

This includes a CNY500 billion swap facility for qualified securities, funds and insurance companies, which will allow them to use their own bonds, stock ETFs, and CSI 300 constituent equity as collateral to exchange high-liquid assets such as treasury bonds and central-bank bills.

This will greatly enhance their ability to obtain funds and increase stock holdings, said Pan, emphasising that funds acquired can only be invested in the stock market.

The PBOC will also create a CNY300 billion re-lending tool to guide banks to provide loans to listed companies and major shareholders to support their repurchase and increase of stock holdings, he added. 

The re-lending rate is 1.75%, while the borrowing rate is 2.25%, he revealed, not ruling out the possibility of further expansion. 

Wu Qing, chairman at the China Securities Regulatory Commission, said at the same event that the authority will vigorously develop equity mutual funds, improve the supervision inclusiveness on medium- and long-term capitals’ equity investment, and increase the quality and investment value of listed companies.