China’s biggest money manager E Fund Management will purchase 200 million yuan (US$27.3 million) of its own exchange-traded fund (ETF) product from the open market after a heavy fall in its book value, reflecting the heavy losses suffered by benchmark for the world’s second biggest stock market.
Guangzhou-based E Fund Management, which oversees 1.7 trillion yuan in assets, said it will buy units in its CSI 300 ETF that tracks the CSI 300 Index of the biggest stocks on the Shanghai and Shenzhen exchanges. The decision was made based on the confidence in the long-term healthy and stable development of China’s capital market, it said.
An ETF is an investment vehicle that works like a combination of mutual funds and stocks, which individual investors can buy and sell on a stock exchange like ordinary shares. These pooled investment products usually track a particular index, sector or other assets.
The CSI 300, China’s blue chip benchmark, is down some 7.4 per cent year to date after it fell last week to its lowest level since February 2019. It made a modest recovery after Beijing unexpectedly unveiled a deficit budget and announced a 1 trillion yuan bond offering to fund disaster relief.
Other fund-management firms that have announced similar investment plans this month include Invesco Great Wall Fund Management and Bank of Communications Schroder Fund Management, which have announced buy-backs worth 10 million yuan and 200 million yuan, respectively.
China’s biggest fund manager raises tech bets on regulatory easing, AI boom
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Domestic mutual-fund firms have spent a combined 1.4 billion yuan investing in self-managed products since August, according to the China Securities Journal, a newspaper under Xinhua News Agency.
These liquidity injections could help revive investor confidence while signalling a market bottom, the newspaper said in an article on Monday.
Brokerages are hoping for a turnaround in one of Asia’s worst performing stock markets, with improved economic data and a thaw in China-US ties also fuelling turnaround expectations.
China’s third-quarter growth surpassed consensus estimates and Chinese foreign minister Wang Yi’s US visit is seen as a precursor to a meeting between Presidents Xi Jinping and Joe Biden at the Asia-Pacific Economic Cooperation (Apec) summit next month.
“Given the valuation comparisons among large asset classes, trading sentiment and investor behaviour, the A-share market may have already formed a bottom,” said Li Lifeng, a strategist at Huaxi Securities in Shanghai, referring to China’s onshore stocks. He added that a step-up in share buy-backs and a move to regulate stake reductions made by principal shareholders in the secondary market could also provide support.