China will allow institutional investors to access People’s Bank of China (PBOC) financing for stock purchases and is considering a market stabilization fund. These measures triggered the biggest rally in the CSI 300 Index since 2020. The PBOC will establish a swap and a re-lending facility to support market liquidity. China plans for a market stabilization fund unlocking $113 BILLION from its Central Bank - less than 1% of the total stock market size.
However, some analysts question the long-term effectiveness of these measures due to weak economic growth.
Although these measures might boost sentiment in the short term, will they suffice given the massive real estate downturn?
As illustrated in the chart below, past stimulus efforts have not led to a lasting recovery in the equity market.
