China's two largest stock exchanges have been pressuring large mutual funds to restrict their share sales in what has become an annual ritual, sources said.
Three sources told Reuters that for the second year in a row, authorities sought to calm markets at the start of the year as China faces a tricky time dealing with the second-term Donald Trump administration.
On December 31 and January 2 and 3, at least four large mutual funds received calls from the Shanghai and Shenzhen stock exchanges asking them to buy more shares than they sold each day.
See also: China scrambles to support yuan and sliding markets
The guidance comes as China's stock market begins 2025 with a sharp decline. Worried that incoming U.S. President Donald Trump will impose crazy tariffs Imports of Chinese goods have put pressure on an already sluggish economy.
The funds can sell shares, but if the total value of sales exceeds the value of purchases, they will need to add more positions quickly to fill the gap, according to guidance from the exchanges, one source said.
“There is a tendency for such guidance to become the norm,” the source added, noting that a similar request was made early last year.
The exchange did not contact the source directly but is aware of the discussions. They declined to be named due to the sensitivity of the matter.
The Shanghai and Shenzhen stock exchanges did not immediately respond to Reuters requests for comment.
The CSI 300 Index fell 5% last week
China's blue-chip CSI 300 index fell 2.9% on the first trading day of 2025, its worst start to the new year since 2016.
The benchmark index fell more than 5% last week.
With just two weeks to go before Trump begins his second term as U.S. president, his threat to impose high tariffs on Chinese goods has already attracted attention. disrupted the renminbi And led to a decline in mainland bond yields and stock prices.
The exchange's guidance to investors is one of many steps taken by authorities to stabilize market sentiment.
Among measures to support capital markets over the past few months, authorities launched swap and re-lending programs totaling 800 billion yuan to buy stocks.
Over the weekend, the Shanghai and Shenzhen stock exchanges said they had recently met with overseas institutions to further boost investor confidence. The annual Central Economic Work Conference held in December emphasized that stabilizing the stock and property markets is the top priority in 2025.
Last year, Chinese stocks posted their first annual gain since 2020, closing 14.7% higher, although most of the gains were driven by a brief surge after the policy announcement. September economic stimulus package.
The stock exchange made a similar call to funds early last year when Chinese stocks fell to five-year lows.
- Reuters Additional editing by Jim Pollard
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