The People’s Bank of China on Thursday announced a new swap tool with an initial size of 500 billion yuan (US$70.7 billion) to increase stock market liquidity and “promote the healthy development of capital markets.”
The new Securities, Funds and Insurance Company Swap Facility will allow eligible securities, mutual funds and insurance companies to exchange government bonds and central bank bills against the security of their holdings in corporate bonds and exchange-traded funds, according to a statement released to the newspaper. It is said that it will become. People’s Bank of China website.
The central bank will start accepting applications immediately and added that the scale could grow further.
The move is widely believed to increase the ability of non-bank financial institutions to invest in China’s stock market, which has been volatile over the past two weeks due to market speculation about a strong government stimulus package.
But that does not mean an increase in the money supply, and the law prohibits the central bank from lending to non-bank institutions, the state-backed China Securities News reported.
On Thursday, the SSE Composite Index rose 0.58%, while the CSI300, which covers blue-chip stocks in Shanghai and Shenzhen, rose 0.6%.
