Chinese stocks rebounded in the afternoon following a report that a state institution bought exchange-traded funds, in what would be the latest policy effort to bolster markets.
The CSI 300 Index closed down 0.4% after earlier falling more than 1%. The Shanghai Composite index ended in the green, bouncing back from a 0.6% slide that pushed it near the key 3,000-level that has in the past triggered intervention moves.
The sudden upswing came after China Securities Journal reported an institution bought ETFs whose underlying assets are mostly A-shares issued by central state-owned enterprises. Stocks were sliding earlier as data showed the decline in China’s home sales accelerated in November. While a separate report showed an unexpected pickup in a private gauge of China’s manufacturing activity, it proved insufficient to assuage worries about the economy’s recovery.
The reported buying of ETFs “would be a policy-driven move to prop up markets as investors stand on the sidelines and are hesitant to build positions toward the end of the year,” said Shen Meng, a director with Beijing-based Chanson & Co. Lifting the market in this manner “is unlikely to bring any long-term boost apart from this knee-jerk reaction,” he said.
Authorities have taken steps to lift confidence and put a floor under sinking markets, including purchases of ETFs and bank stocks by the sovereign wealth fund. However, rebounds have rarely lasted more than a day, speaking to profound pessimism among foreign investors in particular.
In Hong Kong, key gauges continued to slide. The Hang Seng China Enterprises Index fell more than 1% while the Hang Seng Tech Index slumped almost 2%.
The CSI 300 benchmark slid 2.1% in November, the worst performance among the world’s major equity benchmarks and missing out on a broad rally in global markets. Foreign investors sold nearly 5 billion yuan ($700 million) on a net basis Friday, following four straight months of outflows.
China Securities Journal didn’t specify the name of the ETFs. Turnover for the China Southern CSI Guoxin Central-SOEs Technology Lead ETF surged to around 10 times the daily average over the past three months on Friday, according to Bloomberg-compiled data.