Chinese state banks are stepping up intervention to defend the weakening yuan, banking sources told Reuters on Monday. Scores of companies have announced share buybacks or executive share purchase plans since Friday, when regulators unveiled plans to ease share buyback rules.
State-owned banks vowed in unison that they would boost support for the economy while state-run asset managers pledged in identically worded statements their "confidence in the long term and healthy development of China's capital markets".
The well-coordinated, wide-ranging efforts going into the twice-a-decade party congress, which opened on Sunday and marks a politically sensitive time, have restored a sense of calm and stability, at least for now, in the financial markets.
China's stocks and its currency had been hit in recent months by the economy's worsening growth prospects, undermined by persistent COVID-19 outbreaks and a wobbly real estate sector.
The Shanghai Composite Index has staged a robust recovery since dropping below the closely watched 3,000-point threshold in the middle of last week. Its Monday finish around 3,085 was its strongest close so far this month.
Investors and analysts believe government pressure on China's largely state-controlled fund sector may have played a role in the stock market rebound.
"Of course, there must have been some jawboning around the 3,000 level, judging from the erratic performance last Thursday and Friday," said Hao Hong, economist at Grow Investment Group.
For Chinese funds, he said: "It would be politically incorrect to sell shares at such low valuation."
China-listed A-shares are now roughly 50% more expensive than their Hong Kong-traded peers. The premium widened sharply over the past week and is hovering near seven-year highs.
Xia Chun, chief economist at wealth manager Yintech Investment Holdings, said this follows a pattern of China stocks typically rising before a party congress and then likely falling afterwards.
In the currency market, the yuan has held steady for the past week, trading mostly within a narrow band between 7.10 and 7.20 per dollar. In late September, it weakened as far as 7.2521 to the dollar, its lowest since the 2008 financial crisis.
Analysts have attributed the recent stability to the central bank keeping its daily fixings, which determine each day's trading band, virtually unchanged near 7.11.
While Xi's message on Sunday emphasised national security, he also said economic growth remains a priority.
On Monday, several state-controlled asset managers including E Fund Management Co, China Southern Asset Management Co and Zhongtai Securities Asset Management said they were investing their own money to buy products, echoing an identical refrain of confidence in China's capital markets.
"It's probably a signal of stabilising markets at a special time," said Niu Chunbao, director of investment at private fund house Wanji Asset.
Chun Xu, fund manager at JSVest Shanghai Ltd, said investor confidence both at home and abroad may be shaken, however, if the stock market slump resumes after the congress and continues until next year's annual session of parliament in March.
"But history tells us simple measures to rescue the market are limited," Xu said. "In the end, everything depends on macroeconomic fundamentals and the profitability of listed companies."
(Reporting by Shanghai newsroom; Editing by Edmund Klamann)
