More than 20 Chinese listed companies have announced plans to use special central bank loans for stock purchases. This is emerging from stock market reports after the People’s Bank of China (PBOC) approved the $42 billion financing program.
The PBOC launched the lending program on Friday. It enables listed companies or their major shareholders to take out cheap loans to finance buybacks or increase in shares. The program is initially worth 300 billion yuan ($42.24 billion).
Companies including oil giant China Petroleum and Chemical Corp (Sinopec) and port operator China Merchants Port Group said over the weekend they had taken special loans from banks for share buybacks or expansion.
Analysts expect more companies to follow suit, injecting new money into the stock market and fueling a rally that appears to be losing momentum.
Under the scheme, listed companies and their major shareholders can get loans at interest rates of up to 2.25%, which could be tempting for companies with higher dividend ratios or net profit margins, said Wang Mengying, an analyst at Nanhua Futures.
“If I’m a business owner… I have an incentive to buy back shares if the cost of equity financing is higher than 2.25%,” Wang said.
Even companies with net profit margins that exceed that number may be willing to buy back shares, she said, predicting that blue-chip companies would be more likely to participate in the program.
Sinopec said in a statement that its majority shareholder has signed an agreement with the Bank of China to obtain special loans worth 700 million yuan to finance the purchase of shares.
In a separate statement, the state-owned oil giant said it has also received up to 900 million yuan in loans from the Bank of China for the purchase of shares.
COSCO Shipping Holdings said it has received loans from the Bank of China to buy back shares worth 2 billion yuan.
($1 = 7.1015 Chinese Yuan)
2024-10-21 01:33:00
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