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China’s leading state-run investment fund has pledged to expand its purchases of stock index funds, showing Beijing’s determination to stabilize a sluggish market.
BANGKOK — China’s state-run investment fund has pledged to expand its purchases of stock index funds, showing Beijing’s determination to stabilize a market slumped by strong selling pressure from the real estate crisis and economic slowdown.
Stocks in Shanghai and Hong Kong soared on Tuesday following the announcement by Central Huijin Investment, a Chinese sovereign wealth fund that owns China’s state-run banks and other large government-controlled companies.
The fund has stepped up purchases of stocks in major state-owned banks and other companies to counter strong selling pressure in China’s market, which is trading at five-year lows.
The Shanghai Composite Index rose 3.2%, and Hong Kong’s Hang Seng Index rose 3.9%. Shenzhen A-share index rose 4.6%.
In Hong Kong, technology stocks such as e-commerce giant Alibaba rose 7.8%, and JD.com rose 7%.
Market watchdogs warned over the weekend that they would crack down on market manipulation, insider trading and other wrongdoing, pledging to protect small investors who typically account for the bulk of trading in Chinese markets.
On Monday, benchmarks in smaller markets in Shanghai and Shenzhen oscillated between modest gains and deep declines, while stocks in state banks and other large companies rose.
The China Securities Regulatory Commission welcomed Central Huijin’s announcement, saying the “historically low” share price highlighted the value of medium- to long-term investments.
“We firmly support Central Huizin in continuing to increase its holding size and strength, creating more convenient conditions and smoother channels for market entry activities,” the company said in a statement. “We will do our best to maintain the stable operation of the market,” he promised.
It also said it would encourage stock purchases by institutional investors such as public funds, private equity funds, securities companies, social security funds, insurance institutions and pension funds, and encourage companies to expand stock buybacks.
Despite a series of moves to instill confidence in and support real estate developers, whose business crisis after the government’s crackdown on excessive borrowing has been a major drag on the economy, this move is enough to change the trend shaking the market. It is unclear whether or not.
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