China to create new monetary policy tools to support stock market: official

The People's Bank of China (PBOC) will create new monetary policy tools to support the steady development of the stock market, the central bank governor said Tuesday.

The central bank will establish a swap program for eligible securities, funds and insurance companies, allowing them to use their holdings of bonds, stock ETFs, CSI 300 constituent stocks and other assets as collateral to obtain high-liquid assets such as government bonds and central bank bills from the PBOC, Pan Gongsheng, governor of the Chinese central bank, told a press conference.

"The swap with the central bank for high-quality liquid assets will significantly increase institutions’ ability to acquire funds and buy stocks. We intend to commence the swap facility with an initial operational scale of 500 billion yuan (about 71.04 billion U.S. dollars) and the scale may be expanded in the future depending on circumstances. The funds acquired through this tool are designated solely for investments in the stock market," explained Pan.

The central bank will also create a special re-lending facility to guide banks to provide loans to listed companies and their major shareholders for buybacks and increasing shareholdings, Pan said.

"The initial quota is 300 billion yuan (around 42.63 billion U.S. dollars). This tool is suitable for listed companies of various ownership structures, such as state-owned enterprises, private enterprises, and mixed-ownership enterprises. We do not distinguish based on ownership," state Pan.

U.S. stocks ended mixed on Tuesday.

The Dow Jones Industrial Average fell by 85.42 points, or 0.18 percent, to 46,584.46. The S&P 500 added 5.02 points, or 0.08 percent, to 6,616.85. The Nasdaq Composite Index increased by 21.512 points, or 0.10 percent, to 22,017.849.

Six of the 11 primary S&P 500 sectors ended in green, with communication services and energy leading the gainers by going up 1.04 percent and 0.78 percent, respectively. Meanwhile, consumer staples and consumer discretionary led the laggards by dropping 1.76 percent and 0.91 percent, respectively.