Chinese exchanges ask big fund managers to restrict stock selling, sources say

Cars travel past a display showing Shanghai and Shenzhen stock indexes near the Shanghai Tower and other skyscrapers at the Lujiazui financial district in Shanghai. — Reuters file

By Reuters

Published: Mon 6 Jan 2025, 5:08 PM

China’s main stock exchanges asked some large mutual funds to restrict stock selling at the start of the year, three sources familiar with the matter said, as authorities sought to calm markets heading into a tricky period for the world’s second-largest economy.

At least four large mutual funds received calls from the Shanghai and Shenzhen stock exchanges on December 31 and January 2 and 3, asking them to buy more stocks than they sold each day.

The guidance came as Chinese stocks kicked off 2025 with deep losses on worries that incoming US President Donald Trump would impose hefty tariffs on Chinese goods, heaping more pressure on an already sluggish economy.

Those funds could sell stocks, but if total selling values exceeded purchases, they would need to add more positions soon to fill the gap, as per guidance from the exchanges, one source said.

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“Such guidance has a tendency to become regular,” the source added, noting similar requests made around the start of last year.

The sources were not directly contacted by the exchanges but are aware of the discussions. They declined to be named due to the sensitivity of the matter.

The Shanghai and Shenzhen stock exchanges did not immediately respond to a Reuters request for comment.

China’s blue-chip CSI 300 Index slumped 2.9 per cent on the first trading day of 2025 — its worst New Year start since 2016. The benchmark lost more than five per cent last week.

With two weeks before Trump begins a second US presidency, his threats of big tariffs on Chinese goods have rattled the yuan and driven mainland bond yields and stock prices down.

The guidance to investors from the exchanges is among many moves authorities have taken to stabilise sentiment.

Among measures to support capital markets over the past few months, authorities have rolled out swap and relending schemes totalling 800 billion yuan for stock purchases.

Over the weekend, the Shanghai and Shenzhen stock exchanges said they had recently met with foreign institutions to further boost investor confidence. The annual Central Economic Work Conference in December highlighted stabilising stock and property markets as the main priority in 2025.

Chinese stocks marked their first annual gain since 2020 last year, closing up 14.7 per cent, although most of the gains were driven by a brief sharp rally following the announcement of a stimulus package in September.

The securities exchanges made similar appeals to funds early last year when Chinese stocks slumped to five-year lows.