HSBC Qianhai Securities Limited: HSBC Qianhai: Buyback support becomes permanent, while A-share technology stocks still face portfolio adjustments

Why has support from market-stabilization policy become more durable?

The China Securities Regulatory Commission has turned relending for share buybacks and stake increases from a temporary arrangement into a permanent facility, while the central bank’s relending rate has continued to fall from 1.75% in October 2024 to 1%. HSBC Qianhai believes this could make share buybacks a more enduring source of market support.
The bank estimates that banks’ on-lending rates may be no higher than 1.5%. Under this assumption, companies with dividend yields above their borrowing costs have an incentive to borrow for buybacks; by comparison, the overall dividend yield of the CSI 300 is about 3%.
As of October 2026, applications for relending had reached 440 billion yuan, and buybacks executed that year had reached a record 134.5 billion yuan, with roughly half of the repurchased shares cancelled.

The policy encourages constituents of key indices and leading technology companies to repurchase shares. It also adds circumstances in which buybacks may be used to stabilize share prices, such as when a stock falls below its offering price; arrangements also cover buybacks and cancellations by companies that raised more than intended in their offerings.
The intended size of the third phase of the swap facility for securities, fund and insurance companies exceeds 100 billion yuan. According to Cailian Press, an additional 200 billion yuan in relending quota for buybacks and stake increases was split equally between the two state-owned platforms Chengtong and Guoxin. Rules governing margin-financing deposit ratios, collateral conversion ratios and maintenance margin ratios have also begun to ease.
HSBC Qianhai believes this combination expands buying support for technology stocks through buybacks and ETF purchases while also addressing selling pressure from sources such as margin financing, thereby establishing a policy floor.

As of 2 November, the A-share information technology sector had fallen more than 45% since July. Over the same period, margin accounts recorded net outflows of about 700 billion yuan, including about 362 billion yuan from the information technology sector.
Net inflows of about 400 billion yuan from Central Huijin and about 60 billion yuan from the two state-owned platforms partly offset the margin-financing outflows. HSBC Qianhai estimates that, after purchases by public mutual funds and ETFs bought by the national team are included, the market still has a liquidity gap of about 266 billion yuan.
The bank noted that the market had not yet stabilized at the time and might need further inflows from the national team.

In the third quarter of 2026, domestic public mutual funds and northbound investors reduced their allocations to the electronics sector by 7.1 and 5.7 percentage points, respectively, from the previous quarter; both also reduced their allocations to communications and electrical equipment by at least 1 percentage point.
Despite the decline in allocation, HSBC Qianhai estimates that active public mutual funds’ net sales of information technology stocks in the third quarter amounted to only about 1% of their holdings in the sector at the end of the second quarter. The bank believes the substantial remaining positions have been an important driver of the continued adjustment in technology stocks since the start of the fourth quarter.
Capital also shifted to other sectors: domestic and overseas institutions both increased allocations to healthcare, banks, and food and beverages; domestic institutions favored machinery companies benefiting from the construction of the “six networks,” while northbound investors were more positive on insurers and brokerages.