Chinese national team gets involved in ETFs as stocks plummet

(Bloomberg) — Some exchange-traded funds favored by China’s sovereign wealth fund saw spikes in inflows after the country’s stocks fell below a key psychological level.

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Daily flows into four ETFs bought by Central Huijin Investment Ltd. during a market downturn more than doubled this year’s average over the past two weeks, according to Bloomberg calculations. The most active buying came after the Shanghai Composite Index closed below 3,000 points for the first time since March on June 21.

The surge in capital flows into ETFs, including the country’s largest ETF, the Huatai-Pinebridge CSI 300, adds to signs that the so-called “national team” may have stepped in to boost market confidence ahead of the Communist Party’s third plenum later this month. State-owned funds played a crucial role in stabilizing the stock market when the Shanghai Composite Index plunged in February.

However, the value of net capital inflows over the past two weeks is much lower than government purchases earlier this year, and those purchases have not had much effect on the current market decline. China’s benchmark CSI 300 index ended its seventh week of decline, the longest losing streak since 2012, due to mounting pressures on the country’s economic growth and tariff disputes with the country’s major trading partners.

Trading volume in the Huatai-Pinebridge ETF jumped to about 190% of the three-month average on Friday, as the benchmark index pared a decline of as much as 1.3% to close down just 0.4%.

(Updated with Friday’s sales figures)

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