(Bloomberg) — Equity purchases by Chinese government-led funds aimed at supporting the market will likely slow down if mainland stock benchmarks can hold their recent rebound, according to Jefferies Financial Group Inc.
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The so-called “national team” likely stepped in on Jan. 16 after a rapid decline that was driven by derivatives and quant-fund trading, analysts including Shujin Chen wrote in a note. Their “abnormal” purchasing seems to have largely declined after the Shanghai Composite Index reached 3,000 on Feb. 23 before spiking again Tuesday, likely to stabilize the market during the National People’s Congress, the analysts said.
The central bank hasn’t recently said that it will provide “unlimited liquidity support” for the national team, as it did in the 2015 crash, and Jefferies now sees a lower chance for the government funds to continue equity purchases when the Shanghai gauge is above the key 3,000 level.
State funds have been key to stabilizing the market during its recent rout, with Central Huijin Investment Ltd. saying last month that it will continue to increase its holdings of exchange-traded funds. A flurry of trading volume spikes across a number of ETFs suggest authorities have been actively buying both blue-chip and small-cap stocks.
Read More: China’s National Team Bought $57 Billion of Shares, UBS Says
The Shanghai Composite Index is up 13% from a February 5 low, after declining over the past two years.
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