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China banned brokers from opening offshore trading accounts for domestic investors and launched its first buying program targeting top bank stocks since 2008 as capital outflows and a foreign sell-off weighed on Chinese markets.
A notice dated September 28 seen by the Financial Times showed that the China Securities Regulatory Commission ordered Chinese securities firms and their offshore subsidiaries to “close all new account opening channels for domestic investors seeking to invest in offshore markets.”
The China Securities Regulatory Commission said in a note first reported by Reuters that “domestic investors are prohibited from opening overseas fund accounts.” It added that brokers must stop marketing such services to “domestic and foreign” investors. The China Securities Regulatory Commission did not immediately respond to a request for comment.
The move comes as Chinese policymakers try to boost confidence in the economy and financial sector after a slow economic rebound from the coronavirus pandemic and a prolonged liquidity crisis for property developers. China’s CSI 300 index has fallen more than 5% this year as investors’ confidence in the world’s second-largest economy is fragile.
Beijing-backed funds increased stakes in China’s four biggest banks on Wednesday, raising hopes of further action to boost market sentiment.
State-controlled Central Huijin Fund invested more than 477 million yuan ($63 million) in China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China. Shares of four banks rose on Thursday.
Central Huijin is already a major shareholder in the four banks, and the investment, the first such purchase in eight years, helped lift the broader market.
China’s benchmark CSI 300 index of shares listed in Shanghai and Shenzhen rose 0.5%, while Hong Kong’s Hang Seng China Enterprises Index rose nearly 2%.
Central Huijin was established in 2003 and is now a US$1.4 trillion subsidiary of the China Investment Corporation Sovereign Wealth Fund, aiming to become a major shareholder of China’s state-owned financial institutions. It will continue to buy stakes in the four state-owned banks over the next six months, according to exchange filings by the banks on Wednesday.
China’s Ministry of Finance said in August that it would halve stamp taxes on stock transactions to “activate the capital market and boost investor confidence,” but the gains from the move quickly faded.
Foreign investors have been selling off stocks for months, sending stocks lower and putting pressure on the yuan, which is down 5.5% against the dollar this year.
Analysts at HSBC on Wednesday cut their year-end target for the CSI 300 by nearly 5%, saying they had “underestimated the scale of the overseas sell-off in August and September.”
“Beijing wants to show foreign investors, who have been selling off Chinese stocks for months, that they will support the market,” said Louis Tse, an independent analyst and China market expert. “But I’m still worried it won’t be enough to change the mood.”
Central Huijin is often viewed by investors as the buyer of last resort in China’s stock market. In 2015, its purchases of state bank shares coincided with a broader market collapse.
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