The China Securities Regulatory Commission (CSRC) has pledged its support to Central Huijin in bolstering the financial markets. Central Huijin and the People’s Bank of China (PBOC) are functioning as a quasi-stabilisation fund.

China is set to introduce reform measures aimed at enhancing technology boards. Adequate preparations have been established to manage external economic shocks.

Encouraging Long Term Capital

The CSRC intends to actively encourage the infusion of long-term capital into the stock market. Confidence remains high in achieving stable development in China’s stock market environment.

We’re now seeing clearer intentions from the regulators — not idle reassurances, but tangible steps. The CSRC gave its backing to Central Huijin, the state investment arm, reinforcing its role in calming volatility and pumping liquidity where needed. This, coupled with support from the People’s Bank of China, resembles actions seen during periods of domestic stress in past trading cycles, such as in 2015 and 2008. The objective remains clear: reduce panic-driven selling and anchor pricing expectations more firmly.

With preparations laid to shield the financial system from global economic headwinds, there is little ambiguity about what policymakers fear — foreign capital instability, tech stock fragility, and policy tightening overseas. Strengthening the technology boards signals a desire to direct capital flows toward domestic innovation rather than property and infrastructure — sectors that previously drove cycles but are now less favoured. Momentum here could begin impacting risk premiums on relevant contracts, especially those tied to mainland growth sectors.

By stating it will “encourage” long-term money into equities, the CSRC is gesturing to large institutional players — pension funds, insurers, perhaps even sovereign pools. This means an intended shift from short-term, sentiment-driven speculation toward something more anchored, slower moving, but potentially impactful over time. When this kind of participation increases, volatility typically tapers in major indices, and the composition of flows becomes easier to track.

Market Stability and Policy Responses

Liu, in his recent remarks, underscored confidence in achieving steady progress. Layered into the current policy tone is a reminder: the tools remain on hand, and authorities will not hesitate to deploy coordinated effort if market signals begin to weaken abruptly. This is not only a signal to domestic investors but also a calibration point for those watching from offshore.

Over the next one to two weeks, the direction of large-cap indices may become less reactive to news headlines and more driven by policy impact. Short-dated implied volatilities already hint at a ceiling, though relative strength remains with futures tied to tech-heavy boards. Options positioning suggests that recent hedging may unwind in waves if downside triggers fail to materialise. In this scenario, we anticipate dealer gamma exposure to flip more positively, which typically reinforces stability unless intraday volume spikes.

For us, the real takeaway lies in how predictable policy responses are becoming. One could start aligning tactically around that. The implied message from reform efforts and market interventions is stability first — and that’s not usually incompatible with near-term tactical moves, particularly in instruments most closely tied to domestic flows.

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