In-Depth: Stock Market Booster Has an Immediate Effect (AI Translation)

【周刊提前读】深度：A股强心针立竿见影 业绩底仍待验证

Financial support for high-quality economic development focuses on benefiting the capital markets. At a press conference on September 24, top executives from "One Bank, One Bureau, One Commission" introduced measures to enhance the capital market, including new monetary policy tools, promotion of long-term capital entry, support for mergers and acquisitions, and the study of a stabilization fund [para. 1][para. 2]. The accommodative policy measures led to significant gains in the A-shares market, with the Shanghai Composite Index closing at 2,863.13 points, its biggest single-day gain since July 2020 [para. 3]. Despite intermittent fluctuations, the market showed resilience with trading volumes surging [para. 4][para. 5].

The Politburo of the Communist Party of China also held a meeting on September 26 to discuss economic strategies, emphasizing various policy measures, including those impacting the capital markets [para. 6]. A-shares continued to rally, supported by favorable policies and increased foreign capital inflows, with trading volumes remaining over 1.1 trillion yuan [para. 7][para. 8]. On September 27, technical issues due to a surge in buy orders highlighted the psychological impact of intensive policies on investors [para. 9].

Investor sentiment improved, with rumors of a bullish market spreading. Even Wall Street investor David Tepper expressed optimism about Chinese assets [para. 10][para. 11]. However, some experts argue that current policies primarily provide liquidity rather than addressing asset quality, suggesting a need for more effective implementation of fiscal policies [para. 12][para. 13]. Goldman Sachs noted a gap between policy expectations and implementations, indicating China's market may remain tactical until real estate issues are resolved [para. 14][para. 15].

To boost market liquidity, the People's Bank of China announced structural monetary policy tools aimed at assisting securities, fund, and insurance companies [para. 16][para. 17]. A swap facility for securities was introduced, with an initial scale of 500 billion yuan, potentially expandable based on market conditions [para. 18]. While the swap facility is beneficial for market liquidity, its attractiveness varies among institutions, with public funds showing less interest [para. 19][para. 20]. Swap facilities have been utilized globally and domestically during financial crises, emphasizing their role in enhancing market stability [para. 21].

The policy's efficacy in invigorating market participation and preventing market stampedes is significant, although its impact on long-term investors, like insurance companies, remains limited due to existing leverage tools and investment willingness heavily dependent on economic fundamentals [para. 22][para. 23]. On stock buybacks and re-lending, the central bank aims to encourage listed companies to increase repurchases, boosting investor confidence [para. 24][para. 25]. Historically, buybacks have shown positive short-term effects on market sentiment [para. 26].

Regarding the stabilization fund, authorities stated it is under research, with indirect market interventions being more common in China [para. 27][para. 28]. Examples from other countries show that stabilization funds can effectively mitigate market volatility, though long-term impacts depend on broader economic conditions [para. 29].

The China Securities Regulatory Commission (CSRC) has introduced the "Six Measures for Mergers and Acquisitions" to support high-quality M&As among listed companies [para. 30][para. 31]. Although M&A activity remains cautious, new measures provide more flexible options and encourage vertical and cross-industry mergers aligned with commercial logic and industrial transformation [para. 32][para. 33]. Revised rules aim to facilitate smoother and more effective M&As, but market response is still measured [para. 34][para. 35].

Addressing the need for long-term investment, the CSRC and other financial authorities are promoting policies to facilitate the entry of long-term funds into the market [para. 36]. Despite existing challenges like the structure and institutional environment for long-term investments, new initiatives aim to boost equity public funds and insurance capital participation [para. 37][para. 38]. Recent measures include the establishment of long-term insurance investment funds and adjustments in regulatory and assessment frameworks to encourage more stable and sustained investments [para. 39][para. 40]. The impact of insurance funds in the market remains constrained by regulatory and accounting standards that influence their investment strategies [para. 41][para. 42].