China stocks rose on Wednesday as a growing number of listed firms encouraged employees to buy shares, and as the central bank injected more funds into the banking system to ease fears of a mid-year liquidity crunch. Hopes that MSCI will include China’s A shares in its indexes later this month also whetted investors’ appetite for big-cap stocks, with more investment banks predicting a good chance of such a move.
The blue-chip CSI300 index rose 1.1 percent to 3,529.53 points by the lunch break, while the Shanghai Composite Index gained 0.9 percent to 3,131. Over the past week, controlling shareholders of over a dozen listed companies have called on employees to buy the companies’ shares, while promising to take any losses incurred if they hold the shares for at least 12 months.
The firms include Shenzhen Fengda Technology Co, Eastern Gold Jade Co and Great Wall International ACG. Shares in those companies have jumped in response, and the optimism appears to be spreading as investors bet more companies would issue similar statements.
Unlike in the mid-2015 market crash, when a slew of state firms made buybacks, the calls this time are coming from private major shareholders of smaller companies. Markets watchers said it was not clear if the calls to buy shares were linked to broader efforts by authorities to stabilise money and currency markets in recent weeks.
But investors drew some solace from signs that the central bank is moving to ease worries of liquidity stress later this month as banks face the central bank’s quarterly health check. On Wednesday, the People’s Bank of China injected 180 billion yuan ($26.50 billion) into the interbank market via open market operations, after in the previous session providing capital support via one-year Medium-term Lending Facility (MLF) loans.
In addition, an increasing number of institutions are now betting China’s A shares will be included in the MSCI’s benchmark index. The decision will be made on June 20. “MSCI inclusion now a real likelihood,” asset manager Robeco said in a report this week.
“We think this time there is a real chance of success. With the improving fundamentals and attractive valuation, we are positive on the market outlook.” Stocks rose across the board in China, with consumer and healthcare stocks leading the rise. Hong Kong stocks were roughly flat.
Hong Kong stocks were roughly flat. The Hang Seng index was unchanged at 25,988.32, while the Hong Kong China Enterprises Index gained 0.4 percent, to 10,649.08.