SHANGHAI (Reuters) - Several leading Chinese brokerages said on Tuesday that they will increase the size of their proprietary stock trading - answering Beijing’s call for listed firms to bolster their backing for struggling stock markets.
Guotai Junan Securities Co (601211.SS), Changjiang Securities 000783.SZ and Pacific Securities (601099.SS) all said they will increase the size of their equity trading funds to 20 percent of net assets, up from 15 percent currently, in announcements posted on exchange websites in Shanghai and Shenzhen.
Orient Securities also said it would use 20 percent of net assets to invest in equities, while Western Securities 002673.SZ said it would increase its trading fund size to 9.5 billion yuan ($1.49 billion) from 7 billion yuan.
The announcements follows a joint statement issued late on Monday by China’s major institutions charged with supervising financial markets, which encouraged listed firms to merge, offer cash dividends, and buy back shares to support the market.
The China Securities Regulatory Commission (CSRC) recently said it would allow market forces to play a greater role in equities trading.
Market observers had interpreted that as a shift from an offensive strategy aimed at restarting a bull market to a defensive one trying to head off a further crash, but markets crashed shortly afterwards.
Since then regulators have appeared to return to intervention, both by signaling fresh funds from pensions were on their way into the stock market, and by attempting to persuade more investors to commit funds.
This is far from the first time the CSRC has tried to encourage share buybacks by listed firms, seen as a cheap way to inspire other investors to come back to market, but the tactic has rarely produced much noticeable long-term benefit. “It would only work if investors believed the government was willing to do whatever it takes, and the problem is they’ve already shown that they won‘t,” said Julian Evans Pritchard of Capital Economics in Singapore.
“These measures are inadequate. It’s just trying to put out a big fire with a glass of water,” said Yang Hai, strategist at Kaiyuan Securities.
Guotai shares in Shanghai rose sharply on the resumption of afternoon trade following the announcement, gaining 1.6 percent for the day, and bank stocks also rose, but wider indexes remained down around 2 percent.
“The policies coming out of China with regards to its equity markets are a cat’s cradle of contradictions,” wrote Angus Nicholson of IG, a trading services firm, in Australia.
“If one was a Chinese equity investor trying to invest with the government’s intended policy direction, then one would be throwing one’s hands up in confusion at this point.”
Reporting by Pete Sweeney and Samuel Shen; Additional reporting by Kazunori Takada and Nathaniel Taplin; Editing by Simon Cameron-Moore