PBOC extends support following stock market decline

China's central bank conducted the second operation that encourages financial institutions' stock market investments on Thursday while optimizing the implementation of another pro-market tool, showcasing authorities' stepped-up efforts to fulfill their commitment to shoring up investor confidence.

The People's Bank of China, the country's central bank, said on Thursday it launched the second operation of the Securities, Funds and Insurance companies Swap Facility, which facilitates financial institutions' asset pledging for financing to invest in the stock market.

The move, in collaboration with the China Securities Regulatory Commission, is aimed at better leveraging the role of securities, funds and insurance institutions in stabilizing the stock market, the PBOC said in a statement on Thursday.

The operation amounted to 55 billion yuan ($7.53 billion), conducted through an interest rate bidding process, completed on Thursday. A total of 20 institutions participated in the bidding, with the highest bid rate at 30 basis points, the lowest at 10 basis points, and the final winning bid rate set at 10 basis points.

Meanwhile, financial authorities have recently optimized the implementation rules of the central bank lending facility for share buybacks and shareholding increases, to further enhance policy support and streamline the process for participants.

The minimum self-funding ratio required to apply for the share buyback loans was reduced to 10 percent, meaning that financial institutions can provide financing for 90 percent of listed companies' actual amount for buybacks and shareholding increases.

Additionally, financial authorities now allow listed companies and their major shareholders to pledge stocks they hold as collateral to apply for the share buyback loans, while encouraging the issuance of the loans through credit-based methods, providing greater flexibility for market participants.

As of the end of December, official data showed that financial institutions had reached cooperation intentions with over 700 listed companies and major shareholders on share buyback and holding increase loans, more than 200 of which had disclosed plans to apply for the loans with a total cap exceeding 50 billion yuan, at an average interest rate of about 2 percent.

These measures highlight the government's commitment to stabilizing the stock market and fostering a more confident investment environment, after the benchmark Shanghai Composite Index down by 2.66 percent on Thursday to close at 3262.56 points, the lowest since late November.