23 companies listed in Shanghai and Shenzhen have applied for more than 10 billion yuan in loans
The Chinese central bank’s programme to issue loans for share buybacks has provided immediate support for stock prices but also raised questions about its long-term effectiveness and borrowers’ intrinsic value, according to traders and analysts.
After the People’s Bank of China’s (PBOC) announcement last week, 23 companies listed in Shanghai and Shenzhen, including Sinopec and Cosco Shipping Holdings, have applied for loans, state-run Securities Times reported. The companies have applied for more than 10 billion yuan (S$1.84 billion) in loans, according to Bloomberg calculations.
The programme offers 300 billion yuan in low-cost loans to 21 eligible commercial banks, which will then lend to qualified companies and shareholders, according to a PBOC statement on Friday. The PBOC also announced the start of a swap facility, which allows institutional investors to access liquidity from the central bank to purchase stocks.
Market watchers’ reactions underscore their wait-and-see mode given volatility in China’s markets and broader economic sluggishness despite a series of other recent government stimulus measures.
Shares of Wuhu Foresight Technology, a loan applicant, rose as much as the daily limit of 20 per cent on the mainland. Shares of Cosco climbed as much as 5.5 per cent in Hong Kong. BLOOMBERG
