China’s central bank kicked off two funding schemes on Friday that will initially pump as much as 800 billion yuan into the stock market through newly-created monetary policy tools.
“The shoes finally dropped,” said veteran investor Wen Hao, who had been anxiously waiting for implementation of the schemes. Under the swap scheme, initially worth 500 billion yuan, brokerages, asset managers and insurers can obtain liquidity from the central bank through asset collateralization to buy stocks.
In addition, institutions can use the tool to access liquidity in a stock market rout without having to sell shares in a downward spiral. The central bank also launched a relending program, initially worth 300 billion yuan, that would allow financial institutions to borrow from the PBOC to fund share purchases by listed companies or their major shareholders.