Sovereign Wealth Fund Bank Buying Provides Support

Chinese stock indices were comfortably higher on Thursday, albeit closing off best levels with the CSI 300 +1.0%. HK’s Hang Seng outperformed the mainland once again, adding 1.9%, with the HSCEI +2.2%.

• Late Wednesday news that China’s sovereign wealth fund increased stakes in the nation’s biggest banks for the first time since 2015, along with plans to increase holdings in the space over the next 6 months, provided the headline driver for the move higher.
• Financial sector outperformance was understandably witnessed.
• Participants welcomed fresh signs of state support for the stock market, with the news flow providing a sense of relief after the well-documented run of worry centred on economic headwinds and the property sector.
• Wednesday’s late rally in U.S. equities would have also aided sentiment.
• Flow wise, Thursday saw CNY6.6bn worth of net buying of mainland equities via the HK-China northbound Stock Connect schemes, although flows for the week remain in net negative territory.