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Central Huijin Buoys China's Banks

By Zhao Juan (赵娟)
Economic Observer Online
Oct 11, 2011
Translated by Song Chunling
Original Article:

It looked like it was going to be yet another "black Monday" on the Chinese A-share yesterday, with both the Shanghai and Shenzhen indices dropping to their lowest level for the year, but things were shaken up after Xinhua News Agency announced just after the close of the day's trading, that Central Huijin Investment Ltd. (Central Huijin), an investment company directly under the control of China's State Council, had began purchasing the stocks of China's "big 4" commercial banks - The Industrial And Commercial Bank Of China (ICBC), Agriculture Bank of China (ABC), Bank of China (BOC) and China Construction Bank (CCB) and intended to continue purchasing shares in these banks.

Although mainland markets had already closed by the time the Xinhua story hit the wires, the Hong Kong bourse was still open and stocks in the 4 banks shot up on the news.

This intervention by Central Huijin, which already owns large stakes in all 4 of the banks, is an indication that the state is once again stepping in to prop up the share price of the big banks, which have already fallen by around 30% over the course of this year.

Central Huijin (中央汇金投资有限公司) is a state-owned investment company that was established in 2003. Although connected to China Investment Corporation (CIC), China's sovereign wealth fund, the company is under the direct control of the State Council and is responsible for "preserving and enhancing the value of state-owned financial assets."

This is not the first time that Central Huijin has stepped in to support the stock price of China's four largest commercial banks, the investment company also purchased bank shares during a market downturn at the height of the financial crisis in Sep 2008.

A private trader in Shanghai told the EO that he thought the effects of this attempt to put a floor under bank stocks would be a little weaker than in 2008.

Rough estimates suggest that Central Huijin purchased a total of 200 million yuan's worth of bank shares on Oct 10.

Links and Sources
Xinhua: 汇金公司将购入工农中建四行股票 即日起开始操作
Central Huijin: Official Site


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