How much additional liquidity will the policy bring?

  • A total of 31 securities firms and funds have been approved to participate in the third Securities, Funds and Insurance Companies Swap Facility (SFISF), with applications exceeding 100 billion yuan, roughly equal to the combined 105 billion yuan in the first two operations. JPMorgan believes this round could bring incremental liquidity.
  • No new overall quotas were announced for either tool. Assuming 100 billion yuan is used in the third swap facility, approximately 155 billion yuan would remain of the initial combined quota of 800 billion yuan after deducting 105 billion yuan for the first two swap operations and 440 billion yuan in buyback relending applications; 280 billion yuan of the latter has been disbursed.

How are buyback support and rules changing?

  • The relending program for share buybacks will become a long-term arrangement, and its interest rate will fall from 1.25% to 1%. The China Securities Regulatory Commission (CSRC) is encouraging greater participation by companies including index heavyweights and technology leaders, and pushing for faster execution of announced buyback plans.
  • For buybacks intended to safeguard corporate value and shareholder interests, the proposed rules would add a share price below the issue price as a trigger, remove the restriction during the first six months after listing, and permit orders during opening and closing call auctions.
  • The proposed rules would also require companies listed for less than three years to honor their commitments to stabilize their issue prices, companies with excess proceeds to conduct buybacks promptly, and companies to establish dedicated buyback funds using part of their annual dividends, excess proceeds and proceeds from reselling repurchased shares. JPMorgan believes these changes help address investor concerns about shareholder returns.

Why does JPMorgan believe the market floor is firming?

  • The bank believes policymakers have clearly signaled their intention to support equities, and that recent buying by state-backed funds, together with meetings held by the central bank and the CSRC, could collectively establish a floor for Chinese equities.
  • Valuation is one basis for that assessment: the forward price-to-earnings ratios of the MSCI China Index and the CSI 300 Index are only about 9% above their levels on 24 September 2024; JPMorgan therefore considers the current risk-reward profile attractive.

Which sectors could benefit more?

  • JPMorgan expects the onshore IT sector to be the main beneficiary: the MSCI China A Onshore IT Index's forward 12-month price-to-earnings ratio has fallen from 47 times in June 2026 to 22 times, close to its level at the end of 2024, before DeepSeek emerged. The bank expects earnings growth of 40%–50%, and the trend toward domestic AI development continues.
  • Fund flows and buyback policy also favor technology stocks: state-backed buying in October focused on ChiNext and STAR 50 ETFs rather than CSI 300 ETFs; the CSRC is also pushing technology leaders to accelerate buybacks. The STAR 50 has fallen approximately 50% since the end of June 2026.
  • Brokerages could benefit from larger swap facility operations, as well as a potential easing of margin financing and securities lending requirements and a possible recovery in turnover. The CSRC is studying margin ratios, collateral conversion rates and maintenance margin ratios; the first batch of 18 actively managed ETFs has raised more than 35 billion yuan and will be guided to deploy the funds in the market promptly.