The People’s Bank of China (PBOC) announced on Thursday the commencement of applications from financial institutions to participate in a newly established funding scheme, initially valued at 500 billion yuan ($70.62 billion), aimed at bolstering the capital market.
Eligible securities firms, fund companies, and insurers are invited to apply for the swap scheme, facilitating easier access to funding for stock purchases.
Shanghai Composite rose 2.64% by mid-day, while Hong Kong’s Hang Seng Index gained nearly 4%.
The introduction of this initiative follows a sharp decline in Chinese stocks on Wednesday, subsequent to a robust surge, as waning investor optimism regarding Beijing’s economic revitalization efforts became apparent. The PBOC unveiled the scheme on Sept. 24 as part of a comprehensive policy package to invigorate the economy and enhance capital markets.
Through the swap facility, qualified securities firms, fund companies, and insurers can utilize assets such as bonds, stock ETFs, and holdings in constituents of the CSI 300 Index as collateral, enabling them to obtain highly liquid assets like treasury bonds and central bank bills. The initial scope of the swap program is established at 500 billion yuan, with provisions for potential expansion in the future.
