A rescue operation is underway in China’s equity markets as large and unusual flows into blue-chip funds suggest intervention by state-backed investors to counter a market downturn. The purchasing pattern, characterized by significant inflows into Chinese-domiciled exchange-traded funds (ETFs) tracking the CSI 300 index, indicates the involvement of the so-called “national team” of state-backed investors.
In the month leading up to January 26, more than $17 billion flowed into four Chinese ETFs linked to the CSI 300 index, making it one of the most significant domestic ETF inflows since 2015. The state-backed buying is seen as an effort to stabilize the sliding market, with the “national team” expressing their intent to turn buyers in recent statements.
The inflows into blue-chip funds contrast with foreign investors’ selling of 18.2 billion yuan worth of China stocks via the cross-border Connect scheme in January, marking the sixth consecutive month of net selling by foreign investors.
While state-sanctioned stock buying is expected to provide temporary support to the markets, analysts emphasize that addressing fundamental issues such as oversupply and restoring confidence in property ownership is essential for sustained improvement. The current intervention reflects ongoing efforts by Chinese authorities to stabilize and boost confidence in the domestic equity market.
