After a sharp fall earlier this week, Chinese stock markets saw a strong rebound on Tuesday. This recovery came as China’s central bank and government-backed funds stepped in to support the falling market.
The Hang Seng China Enterprises Index jumped by 3.5%, recovering from its worst trading day since the 2008 financial crisis. At the same time, the CSI 300 Index also went up by 0.7% after a big 7.1% fall on Monday.
To calm down investors, China’s central bank promised to offer more funding support. It said it would provide loans to help sovereign funds buy stocks and stabilise the markets. This move gave confidence to the markets and reduced panic among traders.
A predominant role in the rally was played by China’s “national team” – a group of state-owned investment funds regularly used by the government in troubled market conditions. These investors started buying shares in large numbers. Eight exchange-traded funds (ETFs) tracking China’s state sovereign wealth fund had a total investment of 42 billion yuan on Monday. China Reform Holdings also said it would continue to buy shares to stabilize the market.
This contrasts with the American reaction. Although the stocks of the US are also falling in the midst of the trade war, very little of a reaction has come from American policymakers, including the president, Donald Trump. China, though, immediately used its budgetary resources to boost investor confidence.
The China-US trade war remains among the leading concerns in the world’s markets. In response to China’s retaliation on US tariffs, President Trump warned that more tariffs would be added if China will not get on board on the issue of a deal. China responded by saying that it would “fight until the end.”
The People’s Bank of China also assisted Central Huijin Investment Ltd with raising its stake in stock index funds. The central bank announced it would provide them with all the support in the form of re-lending which would be required to stabilize the market even further.
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Source: Moneycontrol.
News Desk
