China’s exchanges urged large mutual funds to curb stock selling in early 2025

China's main stock exchanges asked some large mutual funds to limit stock selling in early 2025 to stabilise markets amid economic concerns and geopolitical challenges, as per a Reuters report.

This guidance comes as Chinese markets started the year with significant losses, fueled by fears of incoming US President Donald Trump's potential tariff policies.

On Dec. 31, Jan. 2, and Jan. 3, at least four large mutual funds were contacted by the Shanghai and Shenzhen stock exchanges and encouraged to ensure daily stock purchases exceeded sales, the report said citing sources.

The funds were also direct to offset any surplus selling with additional stock purchases promptly.

A source told the news agency that such guidance has been issued in the past, particularly during market downturns, and may become routine.

Similar appeals were made by securities exchanges early last year during a period of five-year lows for Chinese stocks.

China's stock market performance

The CSI 300 Index, a key benchmark of Chinese blue-chip stocks, plunged 2.9% on Jan. 2, marking the worst New Year start since 2016.

Since December 31, the index has ended all four trading sessions in the red.

Date	Close	Open	High	Low
Jan 06, 2025	3,769.98	3,775.99	3,788.85	3,743.07
Jan 03, 2025	3,775.16	3,825.24	3,835.94	3,767.67
Jan 02, 2025	3,820.40	3,931.82	3,934.20	3,796.34
Dec 31, 2024	3,934.91	3,995.87	4,004.35	3,934.91

The index fell 5% over the previous week as fears of new US tariffs on Chinese goods weighed on sentiment.

The yuan and Chinese government bond yields have also faced downward pressure.

China's efforts to stabilise the market

In recent months, authorities have introduced swap and relending schemes totaling 800 billion yuan to support capital markets and facilitate stock purchases.

Over the weekend, the Shanghai and Shenzhen stock exchanges said they held meetings with foreign institutions to boost investor confidence.

The annual Central Economic Work Conference in December emphasized stabilizing stock and property markets as a key priority for 2025.

Chinese stocks recorded a 14.7% gain in 2024, their first annual rise since 2020, largely due to a stimulus-driven rally in September.

The Trump threat to China

Donald Trump’s election victory is expected to shift near-term money flows in three of Asia’s largest equity markets, as tariff risks weigh heavily on Chinese assets.

The looming threat of tariffs complicates Beijing’s efforts to revive its economy and boost market sentiment through stimulus measures introduced in late September, making the ongoing legislature meeting critical for investors.

Chinese stocks faced pressure even before the US election. A rally fueled by a monetary policy surge cooled amid the absence of robust fiscal spending plans.

Since, Trump's comeback victory in November last year, the CSI 300 index has corrected 3%.