China stocks rise on reports of regulatory support, Huafa concerns weigh on bonds
- The blue-chip CSI300 Index rose about 0.5% in early trade after slumping 8.5% in October
China's stock market edged higher as regulators plan meetings to discuss market support, despite ongoing pressure on bond funds and state-backed conglomerate Zhuhai Huafa Group's financial woes.
- Regulatory discussions on supporting capital markets.
- Zhuhai Huafa Group's financial troubles and bond fund pressure.
- Policy tools for share buybacks and market stability.
SHANGHAI: China’s battered stock market edged higher on Monday after media reports said regulators would meet financial institutions to discuss measures to support capital markets, while concerns over a state-backed conglomerate continue to pressure bond funds.
The blue-chip CSI300 Index rose about 0.5% in early trade after slumping 8.5% in October, its worst monthly performance in more than a decade as a selloff in technology stocks weighed on sentiment.
The Shanghai Composite Index climbed 0.3%.
China’s central bank and securities watchdog were due to meet brokerages and fund managers on Monday to discuss the use of policy tools to support capital markets, the 21st Century Business Herald said.
Separately, the People’s Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission and major banks were set to discuss optimising relending facilities for share buybacks and purchases, according to the official Shanghai Securities News.
Stocks related to Zhuhai Huafa Group, a state-backed conglomerate with interests ranging from real estate to investment, continued to slide, while bond funds remained under selling pressure.
Investors remain focused on Huafa after reports last week that it failed to repay two maturing trust products and was seeking extensions on some bank loans.
Shares of Huafa’s China-listed units including Huafa Properties, Advanced Fiber and Weiyue Group continued to slide in early trade on Monday.
Exchange-traded funds tracking bonds remained under selling pressure, after signs of heavy redemptions last Friday.
A listed fund that invests in 30-year Treasuries fell 0.3% in early trade, after slumping nearly 1% on Friday.
Hedge fund manager iFund Asset Management said in a note to clients that the liquidity squeeze around Huafa “has transmitted to bond funds, with some funds forced to trade at a discount.”
UBS economist Yu Song said in a note to clients that “the likelihood of a broad-based stimulus package like the one in September 2024 remains low.”