China strengthens scholarship support to regain confidence in AI

Pequim intensified state intervention in the markets to regain investor confidence in the technological sector after months of falls, with funds associated with the state with entries of $11,500 million (EUR 10,215 million).

According to data compiled by Bloomberg, nine stock exchange funds (ETF), commonly used by Beijing to support markets, received on Tuesday the second largest daily volume of net capital entries from which there is registration.

An unusually high share of purchases focused on funds that accompany the two main Chinese technological indices: the Shanghai Star 50 and the Shenzhen ChiNext.

The two indices valued 9.9% and 6.4%, respectively, on Wednesday, while the CSI 300, which brings together the main companies listed on the Shanghai and Shenzhen exchanges, advanced 2.3%.

The operations were associated with the so-called “national team”, designation assigned to the set of banks, funds and other financial institutions supported by the Chinese State that intervene in the markets to limit falls and stabilise quotations.

Only on Tuesday, ChinaAMC’s Star 50 fund received 1,700 million dollars (EUR 1,510 million), the second largest amount ever, while EFund’s ChiNext fund recorded entries of 1,400 million dollars (EUR 1,243 million).

“ It is clear that there is a change of strategy in relation to previous state-supported ETF purchases,” said Song Zhe, senior investment expert at BNP Paribas Asset Management, quoted by the British Financial Times.

“ In the past, most of the capital entries concentrated on CSI 300”, he explained.

According to the analyst, the Chinese authorities consider that the ChiNext and Star 50 indices are crucial for the economic future of the country due to the concentration of technology companies and strategic sectors.

The intervention comes after months of sales pressure on Chinese stock exchanges, particularly on technology companies, which have suffered heavy falls since July.

The CSI 300 has accumulated a devaluation of more than 11% since the beginning of the year, while the Star 50, which has achieved gains of more than 60%, has also moved to negative ground.

In contrast, the US S&P 500 and Nasdaq 100 indices accumulate two-digit valuations.

In July, the so-called national team bought around $9,000 million (EUR 7,900 million) in shares associated with Star 50 in an attempt to regain investor confidence before the Chinese semiconductor manufacturer CXMT entered the stock exchange.

Market recovery on Wednesday extended to Chinese artificial intelligence companies listed in Hong Kong, with Z.AI valuing 9.6% and MiniMax rising 7.5%.

The Chinese authorities have suspended new stock exchanges and stock issues in the continental markets, in order to support the valuations of listed companies, according to different media.

At the beginning of the week, the financial authorities announced additional measures to stabilise markets, including a reduction in the interest rate of a repo refinancing mechanism, the strengthening of asset exchange operations and incentives for companies to acquire equity.

Small Chinese investors, which play an important role in the development of the country’s stock exchanges, continue to show signs of prudence despite renewed state support.