China Petroleum and Chemical Corp (Sinopec) and 22 other mainland-listed companies will pour a combined 11 billion yuan (US$1.55 billion) into stock buy-backs and stake increases after becoming the first companies to receive funds through a central bank relending programme aimed at shoring up equities.
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Answering the government’s call to use the tool, which is part of a broad package to bolster stocks and the economy, the 23 companies have signed agreements on credit lines with commercial lenders authorised by the People’s Bank of China (PBOC), according to exchange statements on Monday.
The injection of funds, which is expected to add more fuel to a world-beating market rally, comes just three days after the PBOC disclosed details on the 300 billion yuan relending facility.
Sinopec, the nation’s biggest oil refiner, signed with Bank of China on Saturday to borrow as much as 900 million yuan for stock repurchases, it said in a statement to the Shanghai exchange. Meanwhile, parent China Petrochemical will get a credit line of 700 million yuan from the same bank, according to a separate exchange statement.
Listed companies can obtain the loans at an annual rate of no higher than 2.25 per cent from 21 commercial lenders picked by the central bank, according to the rules unveiled by the PBOC on Friday. Initially capped at 300 billion yuan, the scheme will be expanded depending on demand, according to the central bank.
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“For listed companies and their major shareholders, the relending tool offers a relatively low interest rate, and that will encourage more companies to buy back their shares,” said Lu Zhe, an analyst at Founder Securities.