HSBC: Buyback support becomes a regular policy, while tech stocks still face position adjustments

What has changed in market-stabilisation policy?

Buyback relending has shifted from a temporary arrangement to a regular policy, with the rate reduced in successive steps from 1.75% in October 2024 to 1%. HSBC believes lower financing costs will encourage more companies to repurchase shares, providing more lasting support for the stock market.
The China Securities Regulatory Commission is encouraging constituents of major indices and leading technology companies to repurchase shares, and has added circumstances in which buybacks may be used to stabilise share prices, including when a share price falls below its offering price. Margin financing rules, including margin requirements, collateral conversion ratios and maintenance collateral ratios, have also begun to ease.
For the third round of the Securities, Funds and Insurance Companies Swap Facility, 31 institutions expressed interest in participating, with a scale exceeding 100 billion yuan. According to Cailian Press, the two state-owned platforms Chengtong and Guoxin separately received a combined 200 billion yuan in buyback relending quotas.

HSBC estimates that, with the relending rate at 1%, banks’ on-lending rates could fall to 1.5% or below. If a company’s dividend yield exceeds its borrowing costs, borrowing to repurchase its own shares could generate a positive spread. The bank illustrates this economic incentive with the CSI 300’s dividend yield of approximately 3%.
As of the report, buyback relending quotas applied for totalled 440 billion yuan; actual buybacks in the first 10 months of 2026 reached a record 134.5 billion yuan, and approximately half of the shares repurchased were cancelled. Quota applications and actual buybacks represent different stages.

HSBC estimates that margin financing accounts have seen net outflows of approximately 700 billion yuan since July 2026, including approximately 362 billion yuan from the information technology sector. Over the same period, Central Huijin and the two state-owned platforms saw inflows of approximately 400 billion yuan and 60 billion yuan respectively, partly offsetting selling pressure.
By the bank’s calculations, after taking into account funds such as ETF purchases by public mutual funds and the national team, the market still faces a liquidity gap of approximately 266 billion yuan. The report says the market had yet to stabilise as of 2 November and may need further inflows from the national team.
Among inflows since July into ETFs in which the national team holds substantial positions, approximately 191.4 billion yuan went into CSI 300 ETFs and approximately 99.6 billion yuan into ChiNext ETFs.

In the third quarter of 2026, domestic public mutual funds and northbound investors reduced their allocations to the electronics industry by 7.1 and 5.7 percentage points respectively from the second quarter. Allocations to communications and electrical equipment also each fell by at least 1 percentage point.
HSBC estimates that active public mutual funds’ net sales of information technology stocks in the third quarter were equivalent to only approximately 1% of their holdings in the sector at the end of the second quarter, and overall allocations remain high. The bank believes these positions are an important reason for the further adjustment in tech stocks since the start of the fourth quarter.
As of 2 November, the A-share information technology sector had fallen more than 45% since July; during the pullback, TMT still accounted for at least forty percent of A-share turnover.