The Chinese stock market, which had risen the previous day, reversed course on November 3. Expectations for market stimulus measures dissipated within a day, leading to a decline in indices. The Shanghai Composite Index closed down 0.82% at 3,608.10, the Shenzhen Component Index fell 1.21% to 10,876.99, and the ChiNext Index dropped 2.73% to 2,391.65.
On November 2, Chinese authorities announced several measures aimed at boosting the stock market. They reactivated a swap program for securities, funds, and insurance companies (SFISF) and lowered the re-lending rate for stock purchases and major shareholder equity expansions from 1.25% to 1%. The re-lending system for stock purchases and capital increases was transitioned from a temporary to a long-term measure. However, the market reacted skeptically to the effectiveness of these stimulus measures. A Chinese asset management firm stated, "This policy fell short of market expectations," adding that "investors used the previous day's rebound as an opportunity to sell."
Notably, the measures do not involve the central bank injecting large amounts of capital directly into the stock market but rather support liquidity for financial institutions and companies to purchase stocks. Analysts suggest that if investors do not actively buy, the impact on stock prices may be limited.
On the same day, the People's Bank of China announced an increase in the foreign currency reserve requirement ratio from 4% to 6%, effective November 15. This move is expected to absorb approximately $24 billion in foreign currency liquidity, aimed at controlling the pace of yuan appreciation.
In terms of notable stocks, shares related to lithium batteries showed strength. Companies such as Fengyuan Gufen, Yema Dianzi, and Shengyang Gufen hit their daily price limits. According to reports from the lithium battery supply chain for the third quarter, shipments from battery manufacturers for electric vehicles and energy storage systems (ESS) increased by over 50% compared to the same period last year, with quarter-over-quarter growth rates generally between 10% and 20%. Demand for batteries for electric vehicles and ESS is expected to continue improving in the fourth quarter.
Food and beverage stocks also rose, with Huangtaijiuye, Junyao Health, and Yangguang Dairy reaching their daily price limits. This uptick was bolstered by the State Council's announcement of guidelines to strengthen consumer infrastructure and promote a virtuous cycle between consumption and investment. The document emphasizes the need to closely integrate improvements in people's livelihoods with consumption promotion and investments in real assets and human capital.
Meanwhile, the People's Bank of China set the yuan's central parity rate against the dollar at 6.7150 yuan, a slight increase of 0.0004 yuan from the previous day, reflecting a 0.01% decline in the yuan's value.
* This article has been translated by AI.
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