Chinese Fund Managers Heed State Call to Invest After Stocks Stumble

A January stock selloff has set off alarm bells in China, with state media urging big investors to hold their nerve, and several large fund houses dipping into their own capital to help support the market.

Stocks listed in Shanghai and Shenzhen have declined in tandem with global peers recently. That has caught out investors who believed onshore markets were well set for 2022, thanks to modest valuations and a government shift toward supporting growth, after pursuing a series of corporate crackdowns.

On Thursday, the CSI 300 index, which tracks the largest stocks listed in Shanghai and Shenzhen, fell 2% to its lowest since September 2020, according to Wind. Broader gauges of A shares, as onshore-listed stocks are known, also fell.

A day earlier, the state-owned Securities Times ran a front-page article blaming some domestic institutional investors for holding short-term views on some issues and failing to be the “ballast stone” of the market.

The article called on brokerage firms, fund managers, insurers and other institutions to “stiffen the spine” of A shares, and support the development of China’s capital markets.

China’s authorities sometimes use state media to try to influence the market. In July 2020, for example, a prominent editorial about a “healthy bull market” helped fuel a rapid rally, which then prompted the same outlet to strike a more cautious tone a few days later.

On Thursday, at least seven of China’s 10 biggest fund-management companies, including E Fund Management Co. and GF Fund Management Co., said they had put some of their own capital into in-house domestic stock funds.

The biggest investment was of 200 million yuan, or the equivalent of $32 million—a comparatively small sum for a market that was worth some $12.7 trillion at the end of last year.

The new Beijing stock exchange is meant to help smaller companies get more investment to fund innovation, according to a Chinese regulator. Its debut comes even as China tightens its grip on companies seeking listings overseas. WSJ’s Anna Hirtenstein explains. Photo: Li Xin/Zuma Press

The statements were similar, with most fund houses saying they invested because they are confident in the long-term health and stable development of China’s capital markets, and that investments would be held for at least a year.

Stocks in China have been slightly more resilient than some other markets so far this year in the face of looming tightening by the U.S. Federal Reserve.

The CSI 300 has fallen about 6.5%, and the broader Shanghai Composite is down about 6.7%. That compares to an 8.7% pullback for the S&P 500 and a 9.1% drop for Japan’s Nikkei 225.

The onshore Chinese market will be closed all of next week for the Lunar New Year holiday.

Write to Rebecca Feng at [email protected]