SHANGHAI (Reuters)

China's central bank initiated its first operations on Monday under a new swap facility aimed at supporting the stock market, exchanging assets worth 50 billion yuan ($7 billion) with brokerages, fund companies, and insurers.

The People's Bank of China (PBOC) reported that 20 institutions participated in the swap operations, which carried a fee rate of 20 basis points.

Launched on Friday, this swap facility is part of broader efforts to revitalize China's stock market and address economic challenges posed by a property sector crisis and subdued consumption.

Following Beijing's announcement of aggressive stimulus measures on September 24, Chinese shares saw a surge, although the rally has lost momentum in recent weeks as initial enthusiasm gave way to caution.

Analyst Wang Mengying from Nanhua Futures noted, "The swap scheme was established solely to enhance market liquidity, as the funding can only be used for stock purchases." Wang remains optimistic about the future of China's bull market.

The swap scheme, valued initially at 500 billion yuan, allows brokerages, asset managers, and insurers to gain easier access to funding by trading risk assets such as stock ETFs and blue-chip stocks for more liquid assets like treasury bonds and central bank bills.

The first batch of 20 participants includes firms like China International Capital Corp (CICC), Citic Securities, China Asset Management Co, and E Fund Management Co.

In addition, over 20 Chinese listed companies, such as China Petroleum (OTC:SNPTY), Chemical Corp (Sinopec (OTC:SHIIY)), and China Merchants Port Group, have revealed intentions to utilize special central bank lending for share buybacks and purchases under another newly-created funding scheme, also valued at 500 billion yuan.

($1 = 7.1111 Chinese yuan renminbi)