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Playing SAFE: Why Chinese forex regulator buying up stocks is raising eyebrows

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An investor looks at an electronic screen showing stock information at a brokerage house in Nanjing. Photo: Reuters.

China’s foreign exchange regulator, the State Administration of Foreign Exchange (SAFE), has

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become the latest member of the ‘national team’ tasked with propping up the stock market, raising questions about both its suitability for the job as well as the efficacy of a programme that has failed to animate the market despite splashing out billions of yuan.

According to published company filings by Thursday, Buttonwood, or Wutongshu Investment Platform, a wholly owned company under SAFE, along with its two subsidiaries bought 27 billion yuan (HK$32.37 billion) of shares in 11 banks and financial companies. That would mean that

for the first time, the manager of China’s US$3.2 trillion foreign exchange reserves is playing the stock market.

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“We understand that at the end of the day, all these national team members report to the top decision makers, but the popping up of new ones just makes the situation murky, triggering suspicions about vested interests backing the market-saving campaign,” said Kay Van Peterson, global macro strategist at Saxo Bank in Singapore.

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