China Mounts Defense as Market Swoon Spurs Foreign Fund Exodus

China is pushing back against investors’ pessimism and shoring up support for its embattled markets.

(Bloomberg) — China is pushing back against investors’ pessimism and shoring up support for its embattled markets.

The nation’s central bank Wednesday vowed to use various tools to keep liquidity reasonably ample, while local fund managers rushed to placate bond investors after a pick up in debt market losses. 

In the offshore market, Hong Kong-listed companies are stepping up share buybacks in a bid to lift valuations, while China’s biggest companies are set to pay out record dividends of 1.5 trillion yuan ($206 billion) this year to revive sentiment sapped by an exodus of overseas investors. 

Beijing has taken a number of steps in recent months to revive investor confidence and stoke growth, from cutting transaction costs in stock trading to restricting some top shareholders from selling stakes. The measures have had limited success — the CSI 300 Index is down about 12% since this year’s high in January, after tumbling 22% in 2022.

Global funds continue to flee the mainland market. They’ve pulled a net 23 billion yuan from onshore stocks so far this month after a record 90 billion yuan selloff in August.

Policymakers’ efforts to lift the gloom that has gripped China’s markets will pay off in the coming years, according to John Lin, chief investment officer of China equities at AllianceBernstein in Singapore. 

“It is certainly not a 2023 story, but 2024, 2025, it is certainly possible,” he said on Bloomberg Television Wednesday. “Today, policymakers are doing just enough to avoid problems in financial sector, to avoid property problems from escalating.”

For now, Chinese companies are expected to further boost their payouts after the country’s regulator recently urged firms to pay good dividends. 

Dividend payments by the CSI 300 Index members this year have exceeded the 1.27 trillion yuan paid out in 2022, according to data compiled by Bloomberg. 

“In the A-share market, it’s definitely a good move given the long history of low cash dividends in the past,” said Willer Chen, senior research analyst at Forsyth Barr Asia Ltd. “The strict move by the regulators should boost the dividend to some extent in the future, but still, the fundamentals matters more at this moment.” 

Leading the dividend payout this year are some of China’s biggest state-owned banks, followed by oil producer PetroChina Co. and liquor maker Kweichow Moutai Co., Bloomberg-compiled data show.

–With assistance from April Ma and Abhishek Vishnoi.

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