China’s biggest ETFs see huge inflows in latest sign of state buying amid third plenum

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Rising inflows into CSI 300-linked ETFs have fanned speculation that China’s state buyers are probably trying to prop up sentiment, analysts say

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Pedestrians cross an intersection with the background of the central business district in Beijing. China’s Communist Party is holding a four-day meeting that is expected to lay out the economic strategy for the next decade. Photo: AP Photo

Zhang Shidongin Shanghai

Published: 7:30am, 18 Jul 2024

The biggest exchange-traded funds (ETFs) tracking a key Chinese stock benchmark have seen spikes in inflows, indicating that state-backed buying could be steadying market sentiment amid a key meeting of the Communist Party.

The ETFs linked to the underlying CSI 300 Index managed by Huatai-PineBridge Investments, E Fund Management, and China Asset Management have all seen above average daily fund flows this week, according to Bloomberg data.

Huatai-PineBridge CSI 300 EFT, the biggest such product with 195.2 billion yuan (US$26.9 billion) of assets, logged 2.9 billion yuan of inflows on Tuesday after 1.1 billion yuan was ploughed in a day earlier, the data showed. The average daily inflow for the year stands at 712 million yuan.

The growing interest in the CSI 300 ETFs has fanned speculation that China’s state buyers, led by Central Huijin Investment, are probably behind the jump in daily inflows in an attempt to prop up sentiment. This comes as the Communist Party’s Central Committee is holding its third plenum in Beijing. The social and economic development plans for the next five to 10 years will be unveiled at the plenum’s conclusion on Thursday.

“There’s a big chance that the state is behind the increased buying of the ETFs,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “They are buying ETFs mainly to put a floor under the CSI 300 Index, which has a big sway over the broader market. That’s a good tactic to stabilise the market.”

China’s state buyers have a tradition of intervening in the stock market during major political events, such as the National People’s Congress and the Communist Party Congress, to create a favourable sentiment among investors. The prevention of systemic risks to the financial markets has been singled out as one of the top priorities of regulators this year.