Credit：Visual China

Central Huijin acquired 27.61 million shares in China’s biggest bank--the Industrial and Commercial Bank of China on Wednesday, and the same day saw the fund bought 37.27 million shares in the Agricultural Bank of China, around 24.89 million shares in the Bank of China, and about 18.38 million shares in the China Construction Bank, according to separate statements of these four banks late Wednesday. As a shareholder of these state-owned banks, Central Hui spent a total of RMB477 million to increase its holdings based on close of the banks’ shares that day. The four lenders said Central Huijin will continue its purchase of their shares at the secondary market over the next six months.  

Tuesday’s statements suggest Central Huijin’s first acquisition of shares since August 2015, when the company invested about RMB20 billion to increase holdings of four major state-backed banks during Chinese equity market turmoil. While the recent investment was relatively small compared to the input eight years ago, Central Huijin’s move highlighted Beijing’s desire to boost the stock market. Furthermore, Central Huijin expressed an intention to continue purchasing more shares in the coming months. Such proactive stance is expected to enhance market sentiment in the near term.  

China can work to set up the stabilization fund to bolster the capital market, starting with allocating part of the foreign exchange reserve assets to Hong Kong shares, and then gradually expanding the holdings to the stock market in mainland China, recommended Li Xunlei, the chief economist of Zhongtai Securities. The Chinese securities firm noted state-backed funds like Central Huijin have been acting as a semi-stabilization fund these years, therefore, it is more likely to turn some of funds into the public stabilization fund first to replace northbound fund’s role of smart money.

Beijing-based Central Huijin was founded in December 2003 and mandated to exercise the rights and the obligations as an investor in major state-owned financial enterprises on behalf of the central government. The investment company makes equity investments in major state-owned financial enterprises, exercises the rights and performs the obligations as an investor on behalf of the central government to achieve the goal of preserving and enhancing the value of state-owned financial assets. The company does not conduct any other business or commercial activity; neither does it intervene in the day-to-day business operations of the firms in which it invests. China Investment Corporation holds the shares of Central Huijin, but the investment business of CIC and the share management function conducted on behalf of the central government by Central Huijin are completely separated.

Besides the “big four” banks, Central Huijin’s portfolio companies also include China Development Bank, China Everbright Group Limited, China Export & Credit Insurance Corporation, China Reinsurance (Group) Corporation, China Jianyin Investment Limited, China Galaxy Financial Holding Company Limited, Shenwan Hongyuan Group Co., Ltd., New China Life Insurance Company Co., Ltd., China International Capital Corporation Limited;, Hengfeng Bank Co., Ltd.; China Securities Co., Ltd., China Galaxy Asset Management Co., Ltd., and Guotai Jun’an Investment Management Co., Ltd.

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