China’s state-owned companies are taking action to stabilize the stock market amid recent volatility. The State-owned Assets Supervision and Administration Commission (SASAC) announced plans to support state firms in buying back their own shares. This move is part of the government’s efforts to boost investor confidence and calm the markets.
SASAC’s announcement reflects a strategic approach to strengthen state-owned enterprises and sustain economic growth in the face of global uncertainties. China Petroleum & Chemical Corp is one of the state companies expected to benefit from this policy. While the specifics of SASAC’s assistance plan have not been detailed yet, market analysts anticipate that the support could significantly boost the market value of key state firms.
The share buyback initiative aligns with Beijing’s ongoing efforts to bolster the state sector. It will likely include financial and regulatory support mechanisms to help state companies repurchase their shares.
State firms initiate stock buybacks
China’s sovereign wealth fund, Central Huijin Investment, also stepped in to support domestic stocks in a separate development. Huijin announced it has increased its holdings in China-listed shares through exchange-traded funds (ETFs) and pledged to continue buying more to “safeguard the smooth operation of the capital market.”
Huijin’s intervention helped Chinese stocks recover from earlier losses triggered by the escalating U.S.-China trade war. The Shanghai Composite Index dropped 7% on Monday, its worst day in five years, after the U.S. imposed additional tariffs on China last week.
Wen Hao, a stock trader and executive at quant service provider Yingzhiliang Hangzhou Technology, said the market has limited room to fall further given the state fund’s support and expected measures like monetary easing and initiatives to boost consumer spending. However, William Xin, chairman of Spring Mountain Pu Jiang Investment Management, cautioned that such support might not be enough to counter the impact of the widening trade war. “Companies are struggling to place orders, set prices, and retain customers,” he noted.
“Hunting for bargains now is like catching a falling knife, so I would rather hold cash until there’s a bit more stability.”
Huijin, part of the state-backed “National Team” of investors tasked with stabilizing the market, intervened with stock purchases via ETFs during a market crash in the spring of 2024. According to Guosen Securities, Huijin had ETF holdings worth 1 trillion yuan ($137 billion) as of the end of last year.
