The Shanghai Stock Exchange held a meeting on Tuesday with 10 of China’s brokerages to emphasise the need to stabilise the market against external shocks.
As the trade war between the two largest economies of the world escalates with each passing day, markets are in the most volatile phase. Chinese brokerages are resolved to help steady the domestic share prices in a joint effort, with multiple listed companies unveiling to buy stocks, as the markets reel from tariffs and retaliatory tariffs.
The Shanghai Stock Exchange held a meeting on Tuesday with 10 brokerages to emphasise the need to stabilise the market against external shocks. Firms like Citic Securities, Orient Securities and Industrial Securities participated in the meeting and pledged to help steady the market, expressing their enthusiasm about China’s growth prospects.
The trade war between Washington and Beijing entered a new phase with President Trump announcing 104% tariffs on all imports from China. The Asian giant is doing everything in its power to protect itself from sinking deeper into the recession, and the meeting with the brokerage marks is yet another move by the Chinese government to minimize the impending damages. State-backed investors like Central Huijin, amongst others, have already promised to increase stock holdings in an effort to stabilize the markets.
Companies like China Chengtong Holdings Group and China Reform Holdings Corp are among the state-back companies which have announced their intention to increase investments. While the stock market recorded a 7% slump on Monday, it improved the following day, when these announcements were made.
These investments are necessary as they are a source of direct liquidity, which is needed to calm the markets. Chinese markets which are dominated by retail stocks are vulnerable to sudden economic shocks. Chengtong has vowed to support high-quality growth of Chinese-listed companies, adding that it plans to expand its holdings in stocks and exchange-traded funds (ETFs) to augment a stable market.
More good news poured in when nearly 100 China-listed companies also announced their plans of share purchases or buybacks to infuse confidence into the markets. The government is also pushing for such enthusiasm from the companies, with over 20 listed companies like PetroChina and Sinopec, that are controlled by the central government disclosed buyback plans guided by the country’s state asset regulator.
China Reform Holdings Corp, also known as Guoxin released a statement confirming its will to increase holdings in tech companies, state firms and ETFs, tallying an initial investment of approximately $10.95 billion. China Electronics Technology Group also affirmed its commitment to boost share buybacks.
State fund Huijin said that it was equipped with enough liquidity and smooth financing channels to aid it in quelling any market volatility as it attempts to become a stabilising force in the market. The company released a statement saying, it has adequate confidence and competence to resolutely maintain the smooth operation of the capital market. Huijin was also supported by China’s central bank which separately released a statement lauding the company’s decision to increase investments.
Despite this uninterrupted tariff implosion by Trump since he assumed office, Beijing is determined to not accept any bullying from the US. After China’s retaliatory tariffs, the US President has doubled duties on Chinese imports. Asia’s largest economy is planning measures to boost the economy, of which, stimulus packages and stock buybacks by brokerages are just the preliminary step. Making rebates on export tax more attractive for domestic companies is one of the plans which could be proposed in the much-anticipated high-profile meeting which is due to occur on Wednesday.
The government has called for an important meeting to discuss the way forward to navigating this trade war. Policymakers, representatives from the finance ministry, central bank and other government bodies are all expected to attend this highly anticipated meeting. Regardless of the outcomes, it is safe to say that China is not buckling under pressure and accepting the US’ attack and attempt to cripple its economy.
