China's 'National Team' Steps In to Stabilize Markets, Ongoing Mechanisms Safeguard A-Shares

On the evening of the 19th (Sunday), China Reform announced it has used special relending for stock buybacks and增持, along with supporting funds, to inject over CNY 500 billion (hereinafter same) into增持 central SOE stocks, sending a clear signal from the 'national team' to stabilize the market with two 'resolute' and two 'determined' commitments.

According to First Financial Daily, China Chengtong also announced it has completed nearly CNY 10 billion in增持, and will continue to use its own funds and relending facilities to make large-scale增持 in state-owned central enterprises, tech firms, and ETFs, fully supporting the stable operation of the capital market.

In addition to the 'national team,' numerous listed companies issued profit forecast upgrades and增持/buyback announcements over the weekend. Multiple securities firms announced share repurchases, and more private equity funds joined the self-purchase wave.

The special relending facility for stock buybacks and增持 is one of the two major monetary policy support tools established in September 2024. For over two years, regulators have continuously strengthened strategic force reserves and market-stabilizing mechanisms, focusing on enhancing the intrinsic stability of the capital market.

The China Securities Regulatory Commission (CSRC) will soon convene a symposium with representatives from securities and fund institutions and listed companies to gather opinions on promoting the stable and healthy development of the capital market. In past critical market periods, the CSRC has held such symposiums, which are seen as positive signals to reassure the market.

The past week saw A-shares experience severe volatility, with tech stocks falling particularly sharply.

Industry experts attribute this downturn to both internal and external factors. Externally, negative impacts from Korean and U.S. markets continue to spill over into A-shares, while repeated Middle East tensions keep geopolitical risks elevated.

Internally, the rapid surge in tech stocks had accumulated significant profits and investor fears of being trapped, leading to concentrated profit-taking and a sharp correction in tech shares.

'The sharp adjustment in A-shares and overseas tech stocks was directly triggered by deleveraging in overseas trading, with A-shares indirectly following suit,' said Mu Yiling, Chief Strategist at Guojin Securities. Korea's market margin balance has clearly declined, and implied volatility in options markets has dropped rapidly, indicating leveraged capital is exiting.

Li Qiusuo, Chief Domestic Strategy Analyst at CICC Research, also believes risk sentiment contagion from overseas market volatility is a key factor behind the A-share correction.

'This AI sector rally was not an isolated move in Korea alone, but a global phenomenon originating in the U.S., with Korea being the most extreme performer. Related sectors in Japan and many other global markets also surged, and A-shares were no exception,' industry insiders said.

Insiders added that the recent synchronized A-share decline reflects global funds rebalancing positions across markets based on the same AI narrative. Whether driven by capital or sentiment, the synchronized cross-market selling behavior is real.