The People’s Bank of China (PBOC) has jointly launched the “Stock Repurchase and Increase Loan” policy with multiple regulatory authorities, with an initial scale of 300 billion yuan, to provide loans to eligible listed companies and major shareholders for stock repurchases and increases. In less than 3 days, more than 20 A-share listed companies have announced their repurchase plans, involving funds exceeding 10 billion yuan.
On the 18th, the PBOC, together with the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, issued the “Notice on the Establishment of Stock Repurchase and Increase Loan”, announcing the establishment of the stock repurchase and increase loan to encourage financial institutions to provide loans to eligible listed companies and their major shareholders to support their repurchase and increase of company stocks. The loan interest rate shall not exceed 2.25% in principle.
According to the announcement of the PBOC, the stock repurchase and increase loan will be issued quarterly, and 21 national financial institutions can provide relevant loans to eligible listed companies and major shareholders holding more than 5% of the shares.
After financial institutions provide loans to listed companies, they can apply for re-loans from the central bank in the first month of the next quarter. The central bank will provide re-loan support for eligible loans based on 100% of the loan principal. The initial quota for re-loans is 300 billion yuan, with an interest rate set at 1.75% and a term of 1 year, which can be extended and the cumulative term can reach 3 years depending on the circumstances.
After the “Notice” was implemented, Chinese state-owned banks quickly took action and began collecting financing demand amounts and time arrangements from listed companies interested in participating, and stated that they would “immediately organize applications for credit approval”. According to publicly available information, as of the 20th, more than 20 listed companies in Shanghai and Shenzhen have announced that they have obtained loans and will repurchase stocks on a large scale, involving a total fund amount of over 10 billion yuan, marking the formal implementation of the first batch of repurchase and increase cases.
Specifically, the first batch of listed companies participating in the repurchase and increase loan include Sinopec, China Merchants Shekou, China Merchants Shipping, China Merchants Port, COSCO SHIPPING Holdings, COSCO SHIPPING Development, Guangdong Electric Power Design Institute, MWE China, ZT Innovation, Weimai Power, Jiahua Energy, Wens Foodstuff, Fosun International, Sunergy, Eagle International, Tongyu Heavy Industry, Muyuan Shares, China Merchants Shipping, COSCO SHIPPING Energy, COSCO SHIPPING Specialized, SMIC, LENOVO, Linglong Tire, etc.
In the Hong Kong stock market, industry giants such as Tencent Holdings, HSBC Holdings, AIA Group, and Meituan-W have also conducted large-scale repurchases.
This policy allows companies to obtain loans at lower interest rates, thereby repurchasing their own stocks or increasing their holdings, stabilizing stock prices. It not only effectively alleviates the financial pressure on companies but also conveys a positive signal of healthy development to the market, which is conducive to attracting investors.
Chinese stock market rises
Inspired by this news, the Chinese stock market has reversed its recent decline and has rebounded since the 18th.
The Shanghai Composite Index has risen from 3,164 points on the 18th to the current 3,284.16 points, an increase of nearly 4%; the Shenzhen Component Index has risen by 7% and is now at 10,530.51 points; the ChiNext Index has risen by 10.5% and is now at 2,234.35 points.
On the 10th, the PBOC also announced the implementation of the “Securities, Funds, and Insurance Companies Swap Convenience” new mechanism, accepting applications from qualified securities, funds, and insurance companies. The initial operation scale is expected to be 500 billion yuan. This new policy allows financial institutions to obtain more liquid assets (government bonds, central bank bills, etc.) from the PBOC by pledging less liquid assets (bonds, stock ETFs, SSE 300 component stocks, etc.), which is conducive to further investment in the market.
Under these two new policies, the Chinese stock market has attracted incremental funds. Whether it can continue to stimulate market growth is worth continuous attention.