Four Shenzhen-based listed companies have obtained special loans for share buybacks and stake boosts from a local bank, becoming part of the country's first 23 A-share companies to receive such funding.
In separate announcements made Sunday, China Merchants Shekou, China Merchants Shipping, China Merchants Port, and Shenzhen VMAX New Energy (Group) Co. Ltd. stated that they had been granted special loans by China Merchants Bank Shenzhen Branch. The combined loan amount extended to the 23 companies totaled 10 billion yuan (US$1.4 billion).
In compliance with relevant policy directives, these funds will be channeled into the capital market via centralized bidding, which aims to bolster the stability of the companies' stock prices, stimulate market trading volume, enhance market dynamism, and ultimately safeguard and amplify investor confidence, according to analysts.
The initiative represents the implementation of a package of targeted and incremental policies China began rolling out last month. The package aims to stimulate market vitality by further deepening reform of the capital market, boost the confidence and activity of investors in the capital market, and promote sustained economic recovery.
During a press conference Sept. 24, Pan Gongsheng, governor of the People's Bank of China, said that the Chinese central bank will create new monetary policy tools to support the stable development of the stock market. The central bank will create a special re-lending facility to guide banks in providing loans to listed companies and their major shareholders for stock buybacks and stake boosts, according to Pan.
The initial re-lending sum for commercial banks will be 300 billion yuan at an interest rate of 1.75%. The banks would be able to lend to their clients at an interest rate of 2.25%, Pan said.
China is actively taking steps to further promote the country's opening up by targeting the capital market and financial sector.
While chairing a symposium in Beijing in late July with foreign financial institutions, Wu Qing, chairman of the China Securities Regulatory Commission, said the commission is studying and planning a package of new initiatives to further deepen reforms and opening up of the country's capital market.
In recent years, China has rolled out more than 50 measures to expand financial opening up, including scrapping foreign ownership caps in the banking and insurance investment sectors and cutting access thresholds for foreign investors, according to the National Financial Regulatory Administration, the top financial sector regulator.