On October 18, 2023, China’s A-shares experienced a significant surge, with major stock indices markedly rising. The Shanghai Composite Index closed nearly 3% higher, while the ChiNext Index saw an impressive increase of nearly 8%. More than 5,000 stocks in the market ended the day in the green.

By the end of trading on that day, the Shanghai Composite Index was reported at 3,261 points, reflecting a gain of 2.91%. The Shenzhen Component Index reached 10,357 points, up 4.71%, and the ChiNext Index closed at 2,195 points, an increase of 7.95%. The total trading volume for the Shanghai and Shenzhen markets soared to approximately 2.1 trillion yuan, representing a spike of over 600 billion yuan compared to the previous trading session.

One of the significant drivers behind this rally was the announcement from the People’s Bank of China (PBOC) regarding two major financial initiatives: Firstly, the central bank introduced a stock buyback and increase loan program, providing an initial quota of 300 billion yuan at an annual interest rate of 1.75% for one year, with possible extensions. Nationwide financial institutions will lend to support listed companies in their stock buyback and increase efforts. Secondly, the PBOC, in conjunction with the China Securities Regulatory Commission, initiated the Securities, Fund, and Insurance Company Swap Facilitation (SFISF) program, which has already permitted 20 securities and fund companies to participate, with initial applications exceeding 200 billion yuan.

According to Xu Fei, an analyst at Wanlian Securities, the stock buyback and increase loan instrument enhances the capacity and motivation for quality companies to engage in stock repurchases. The SFISF is also seen as a significant mechanism for utilizing institutional funds to stabilize the market in the medium to long term. The implementation of these tools has positively impacted investor confidence.

Looking at specific sectors, all industry segments within the A-share market were buoyant on that day. Financial data provider Eastmoney reported that the semiconductor and non-metallic materials sectors led the charge, with gains of 10.33% and 7.48% respectively, while the securities sector also surged by over 5%.