China has launched a ¥500 billion bailout program to support the stock market.
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China's central bank has launched a ¥500B plan to support the stock market. Financial institutions can use various assets as collateral under the new funding scheme.
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The People's Bank of China (PBOC) said today it has launched a ¥500 billion ($70.6 billion) financial support program to support China's capital market. This allows financial institutions such as brokerages, mutual funds and insurers to access the liquidity to purchase shares using existing stock holdings as collateral.
Participants in the swap facility may use liquid assets such as bonds, stock ETFs and holdings in the CSI 300 index components such as Treasury bonds and central bank bills as collateral.
If the initial implementation is successful, the program may be expanded with additional grants, Governor Pan Gongsheng said on September 24. He indicated that the PBOC is considering adding another ¥500 billion, which could take the total liquidity injection to more than ¥1. Trillion.
The move comes in response to a prolonged decline in China's stock market. China's central bank aims to bolster investor confidence amid broader economic challenges.
The program was first announced in late September after the PBOC issued a series of monetary easing measures. The central bank said it will reduce the required reserve ratio for banks by 0.5% from 7% to 6.5%.
Market sentiment responded positively following the initial announcement and measures of the scheme, with major rallies observed in China's stock indices. The proposed monetary stimulus boosted US and European stock markets.
In the crypto markets, Bitcoin broke its downtrend following news of China's aggressive stimulus package and the recent US Fed rate cut. However, Bitcoin retreated earlier this week due to the lack of new stimulus measures from China in its recent briefing.
Concerns about Middle East conflicts and profiteering also contributed to the market decline. Analysts warn that the latest Chinese stimulus may not sustain the pace compared to previous cycles.
However, when China officially launches its plan, Bitcoin is expected to move higher as historically, similar actions have caused Bitcoin's price to increase by more than 100%. QCP Capital predicted that further Chinese stimulus could boost sentiment in crypto and other risk assets.
Bitcoin has traded as low as $60,800 in the past two hours, according to CoinGecko data.
Crypto traders now have their eyes set on the September Consumer Price Index (CPI) report, which will be released tomorrow at 8:30 AM ET, for possible price action signals.
Year-on-year inflation is expected to ease to 2.3% from 2.5% in August, while core CPI is expected to rise 0.2% month-on-month and expect growth of 3.2% year-on-year.
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