PBOC to set up US$71 billion swap facility to prop up stock market
The PBOC plans to set up a swap facility that would give financial institutions access to at least US$71 billion in funding to buy shares
However, some analysts called for more drastic action to shore up investor confidence following more than three years of market declines.
Pan Gongsheng, the governor of the PBOC, said on Tuesday that brokers, mutual funds and insurers would be able to tap into the programme initially by using the shares they already own as collateral. He said that an additional 500 billion yuan of liquidity could be directed to the mainland’s markets if the swap programme is successful.
“I have discussed with [China Securities Regulatory Commission] chairman Wu Qing that we could consider unleashing a second round of 500 billion yuan, or the third batch of 500 billion yuan if the plan were enforced well enough,” he said. “We are taking an open attitude towards the new policy.”
Pan said top financial policymakers are also looking at creating a stabilisation fund to buoy the stock market. Analysts believe this could mean additional funding support amounting to more than 1 trillion yuan.
The mainland’s A-share market has been battered by worries about a deflationary spiral and a bust in the nation’s property market. For the past three years, the CSI 300 Index has been among the world’s worst-performing benchmarks. It has slumped more than 7.6 per cent this year through Monday and appears headed for an unprecedented fourth year of declines.
