China’s Politburo meeting has stoked speculation about more policy support for the country’s stock markets after the first leg of state buying stopped short of stemming a decline that drove technology shares to their biggest-ever monthly slide.
The economic-policy huddle, chaired by President Xi Jinping, made a rare reference to stocks by pledging to bolster resilience and confidence in capital markets, according to a readout released on Thursday. The Communist Party’s prime decision-making body also said that China would deepen the reforms of the capital market in terms of investment and financing.
The rhetoric underscores top policymakers’ priority of financial stability to prop up the stock market, which they rely on for technological innovation and independence through equity financing. China’s tech drive is hitting a snag, with turbulent sell-offs in global artificial-intelligence (AI) stocks spilling over to mainland-listed chipmakers and manufacturers of transceivers used in AI data centres. Attempts to counter the rout, such as regulatory talks and 60 billion yuan (US$8.9 billion) of state buying, failed to revive confidence.
“Amid recent equity weakness, this appears to reflect policymakers’ commitment to supporting the market,” said Scarlett Liu, an equity derivative strategist at BNP Paribas.
That was echoed by brokerages including GF Securities and China Merchants Securities, which said that the tone regarding capital markets at the Politburo meeting signalled an increased chance that Beijing would take more meaningful actions to stabilise stocks.
An electronic screen shows index prices on a pedestrian overpass in Shanghai’s Lujiazui district. Photo: Getty Images
The technology-heavy Star Market 50 Index rebounded 3 per cent on Friday, as investors reassessed the sector’s outlook following both the Politburo meeting and an overnight rally in US equities driven by dip buying. Even after the bounce-back, the gauge still slumped 26 per cent in July, capping its worst monthly performance since its inception in 2020.
