China’s central bank moves to jolt stock market with 50-billion-yuan swap operation
Swap facility lets brokers, asset managers and insurance companies exchange assets with poorer liquidity, enabling them to get liquid assets for stock purchases
The Chinese central bank’s swift enactment of swap facilities has raised market expectations of a firm implementation of monetary-easing policies to help drive up the country’s economic activities.
The People’s Bank of China (PBOC) announced its first swap operation, including with securities, fund companies and insurance companies, with a total amount of 50 billion yuan (US$7.03 billion) on Monday.
The tool was one of the first-batch policies announced on September 24, and it was officially launched immediately after the National Day holiday to provide liquidity to the stock market.
“The swifter move in monetary policies reflects that the growth pressure has reached a tipping point, and [it serves as a] green light from the high government level to roll out stimulus,” said Gary Ng, a senior economist at French investment bank Natixis.
Twenty institutions participated in the auction, with a fee rate set at 20 basis points, according to the central bank’s official statement.
These 20 institutions include Citic Securities, Huatai Securities and China Merchants Securities, with an application amount of more than 200 billion yuan, the China Securities and Regulatory Commission said on Friday.
Another one of the institutions, China International Capital Corporation, on Tuesday made its first share purchase under the swap facility and announced plans to increase its holdings in the future, with an aim to support the healthy and stable development of the capital market, according to a Cailian Press report.
