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Even after top financial institutions were pushed by policymakers to assist in stabilizing a faltering market, Chinese stocks fell, signaling ingrained investor pessimism.
The Shanghai and Shenzhen stock market’s CSI 300 Index fell as much as 0.7%, bringing this month’s decline to 7.7% and maintaining it among the worst performers globally for the year. A crucial indicator of Hong Kong-listed Chinese companies fell by as much as 1.4%. The indexes briefly rose in response to reports of more accommodative mortgage rules, but the gains were quickly reversed.
The China Securities Regulatory Commission used a conference with executives from the country’s pension fund, leading banks, and insurers on Thursday to push them to increase market support. The market’s apathy is hardly surprising, considering that authorities have convened similar discussions on a regular basis in the past and they have rarely had a substantial influence.
“The market is less sensitive to news at this current stage,” said Li Fuwen, fund manager at Guangdong Value Forest Private Securities Investment Management. “What’s key right now is letting that downward momentum run out organically, as policies have already turned supportive, but the shorts will take time to exhaust.”
More policy support was provided on Friday, with the official Xinhua news agency reporting on additional mortgage regulatory relaxation. In its latest move to bolster trust, Fang Xinghai, a vice chairman of the CSRC, will host a meeting with some of the world’s largest asset managers in Hong Kong, according to sources familiar with the subject. According to one source, Fidelity International Ltd. and Goldman Sachs Group Inc. are among those invited.
According to a CSRC release, representatives from the participating financial institutions pledged to help stabilize the stock market and stimulate economic development. The banks and insurers who participated were not identified. The meeting also emphasized the importance of establishing an evaluation process with a three-year time frame, as well as increasing the scale and weighting of equity investment.
China has recently taken a number of initiatives to improve investor confidence, including directing mutual funds to buy their own products rather than dumping stocks and requesting that corporations increase share buybacks. The CSRC conference also coincided with a number of brokerages’ announced Thursday announcements to reduce stock handling fees.
According to Xinhua, authorities, the country is now suggesting that local governments can repeal a law that disqualifies persons who have ever had a mortgage – even if fully repaid – from being considered a first-time homebuyer in big cities.
A Bloomberg index of Chinese real estate equities gained as high as 2.3% before reversing half of its gains.
According to Steven Leung, an executive director of Uob Kay Hian Hong Kong, the recent step “will release some purchasing power, but the focus remains on developers’ existing debt problem.”
Authorities have held similar meetings with financial organizations in the past, particularly during periods of market weakness, including one last week with private fund managers and another earlier with overseas asset managers. The regulator also met with pension funds and large banks in April of last year, during a meltdown in which the CSI 300 lost another 5.7% before bottoming out.
Overseas funds have been fleeing the Chinese mainland market, unloading the equivalent of $10.7 billion in a 13-day withdrawal streak that ended on Wednesday, the biggest since Bloomberg began tracking the data in 2016. Following a brief pause in the previous session, they sold another 1.8 billion yuan ($247 million) of shares early Friday.
According to the statement, the CSRC would investigate ideas provided by the institutions to improve support and circumstances for pension funds, insurance funds, and bank wealth management funds to engage in the market in the long run.