Hong Kong stocks rebound on PBOC’s US$70 billion finance facility, fiscal stimulus hopes

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The Chinese central bank’s liquidity boosting tool sparks a 3 per cent surge in Hong Kong’s Hang Seng Index

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Hong Kong stocks surged on Thursday after China’s central bank introduced a liquidity-boosting swap facility. Photo: Eugene Lee

Zhang Shidongin Shanghai

Published: 10:04am, 10 Oct 2024Updated: 5:40pm, 10 Oct 2024

Hong Kong and Chinese stocks both rebounded from sell-offs after China’s central bank kicked off a US$70 billion financing facility to fund institutional buying and traders bet on more fiscal stimulus to shore up growth.

The Hang Seng Index jumped 3 per cent to 21,251.98 at the close, snapping a two-day, 11 per cent decline. Still, the benchmark tumbled 6.5 per cent for the shortened trading week, as the city’s financial markets will be shut on Friday for a public holiday. The Hang Seng Tech Index gained 2.1 per cent on the day.

The CSI 300 Index rose 1.1 per cent, bouncing back from a 7.1 per cent slump a day earlier. The Shanghai Composite Index finished 1.3 per cent higher. Trading on the mainland’s markets remained wild, with the 10-day realised volatility of the CSI 300 rising to its highest since August 2015, according to Bloomberg data.

Sentiment on the Hong Kong and mainland’s markets seemed to have stabilised after the People’s Bank of China (PBOC) started the swap facility with an initial size of 500 billion yuan (US$70.7 billion). Under the programme, qualified brokerages, mutual-fund firms and insurance companies will be able to swap their holdings of bonds, stock exchange-traded funds and stocks on the CSI 300 for highly liquid assets such as government bonds and central-bank bills, the PBOC said in a statement on Thursday. The scale can be expanded and applications from qualified institutional will be accepted immediately, it said.

The swap facility is part of a combined 800 billion yuan in new funding tools announced by the PBOC last month to bolster the stock market. The package also includes a 300 billion yuan relending programme to finance stock buy-backs and stake increases by listed companies and major shareholders.

08:47

Wild swings in Hong Kong and mainland China stock markets

Investors will closely scrutinise a press conference by Finance Minister Lan Foan on Saturday. Hopes are high that Lan will announce or offer clues on the much-heralded fiscal stimulus after top leaders signalled an all-out pivot to prop up economic growth.