Last Friday, A-shares closed near their lowest point of the day. The Shanghai Composite Index fell 1.44%, losing the 3,600 level, the ChiNext Index dropped 4.13%, the STAR 50 fell more than 5%, over 4,600 individual stocks declined with more than 80 hitting the daily limit, and trading volume expanded to 1.67 trillion yuan. This was a classic stampede-style selloff 鈥?forced liquidations, panic selling, and redemption orders resonated together, with margin financing balances falling by 68 billion yuan in a single day.
For the entire month of October, the ChiNext Index fell 23.02%, the STAR 50 dropped 24.13%, and both had declined more than 40% since July. This morning, all three major indices opened higher collectively, briefly turning negative in early trading, but ultimately rebounded on the back of heavy buying in index ETFs. The Shanghai Composite rose 1.08% to reclaim the 3,600 level, the ChiNext gained 1.87%, the STAR 50 climbed 3.11%, and nearly 4,700 stocks across the market advanced. Compared with last Friday, it was like two completely different markets.
Why? Because regulators stepped in over the weekend, and the level of involvement was different from the past. Around 9 a.m. this morning, the central bank and the securities regulator held a meeting to study and promote the use of tools supporting the capital market. At the same time, the central bank, the financial regulatory administration, and the securities regulator jointly convened major banks to study optimizing the relending policy for stock buybacks and shareholding increases, with the meeting held at the central bank. This round of market rescue finally saw the central bank's presence.
Five instances of central bank intervention since 2015
Since the 2015 rescue, whenever the central bank's top official made public statements or the central bank directly provided money (through Huijin, relending, or special tools), there have been five such instances: July 6, 2015 (central bank pledged liquidity support to the stabilization fund), October 19, 2018 (heads of the central bank, banking regulator, and securities regulator spoke out on the same day), September 24, 2024 (Governor Pan Gongsheng announced two tools at a press conference), April 8, 2025 (central bank explicitly stated for the first time it would provide sufficient relending to Huijin when necessary), and March 9, 2026 (Pan Gongsheng expressed support for Huijin to play a quasi-stabilization fund role).
The CSI 300 basically moved in sync with the Shanghai Composite: averaging a 2.18% gain on the day, rising in 4 out of 5 instances, and averaging a 13.26% gain one year later. After reviewing all three tables, the patterns are quite clear.
First, on the day the central bank intervenes, the broader market is likely to rise. The Shanghai Composite rose in 4 out of 5 instances, averaging a 2.02% gain, and the CSI 300 also rose in 4 out of 5. However, the flexibility of the ChiNext and STAR 50 on those days was noticeably smaller 鈥?the ChiNext rose in only 3 out of 5 instances, averaging a 1.22% gain, and the STAR 50 rose in 2 out of 3 instances, averaging a 1.23% gain, far more moderate than the Shanghai Composite. What the central bank rescues is liquidity and the index 鈥?the first to rebound are often not the hardest-hit tech stocks.
Second, short-term volatility is astonishingly large. The Shanghai Composite averaged a 6.52% gain by T+5, but the internal differences were enormous 鈥?on September 24, 2024, it rose 21.9% over five trading days, while on March 9, 2026, it actually dipped 0.3%. Even with the same central bank intervention, the direction can be completely opposite. One month later, the win rate improved noticeably: the ChiNext rose in all five instances, averaging a 12.68% gain, and the Shanghai Composite also rose in 3 out of 5.
Third, at the three-to-six-month mark, things became less stable, with the Shanghai Composite rising in 3 out of 5 instances, because the 2015 episode saw a rebound followed by another selloff. But stretching to 9 to 12 months, the win rate returned: the Shanghai Composite rose in 3 out of 4 instances, averaging a 15.60% gain, the ChiNext rose in 3 out of 4, averaging a 53.18% gain, and the STAR 50 rose in both samples, averaging an 82.90% gain. The longer the time frame, the higher the sample win rate and elasticity following central bank intervention.
Fourth, the only exception was July 6, 2015: the Shanghai Composite rose 2.4% that day but fell 19.1% one year later. A rescue can improve liquidity but cannot fix bubble valuations 鈥?that instance occurred halfway down from the 5,178-point peak.
Fifth, a note of caution is warranted: the most recent instance (March 9, 2026) was the weakest of all samples. The Shanghai Composite fell 0.7% that day, the ChiNext dropped 0.6%, and the STAR 50 declined 1.7%, the only one of the five that closed lower on the day itself. Ten trading days later, the Shanghai Composite was down 6.9%, and one month later the STAR 50 was still falling 2.7%. This shows that after the central bank's signal emerges, the market still needs time to grind through.
Why markets tend to bottom more easily once the central bank steps in
From the above, it is clear that after central bank intervention, the probability of the market bottoming out is very high. My own understanding is this: many bear markets in A-shares ultimately come down not to valuation problems but to liquidity problems. The decline itself is not what is frightening 鈥?what is frightening is the negative feedback loop triggered by the decline. Stock prices fall, leveraged positions are forcibly liquidated; forced liquidations continue to hammer the market, net asset values and wealth management products see drawdowns, and redemption pressure builds; redemptions in turn force institutions to sell. Last Friday's 68 billion yuan single-day drop in margin financing balances was a living specimen of this chain in operation.
Once the cycle starts spinning, it does not look at fundamentals or valuations 鈥?it only looks at who still has cash on hand. The only thing that can break this cycle is the ultimate supplier of liquidity. The securities regulator can provide rules and expectations; the finance ministry can provide money, but it must go through procedures, has quotas, and requires specified purposes. The central bank is different 鈥?it is the only institution that can say "as much as needed" to liquidity. Its balance sheet is not constrained by the market, which is the lender-of-last-resort principle that Walter Bagehot described over a hundred years ago.
And this round, the central bank's method of providing money is very direct: Huijin buys ETFs upfront while the central bank promises sufficient relending when necessary behind the scenes, effectively making Huijin's responsibility unlimited. The relending policy for stock buybacks and shareholding increases allows listed companies and major shareholders to borrow money to buy their own shares. The swap facility allows non-bank institutions to exchange stocks for liquidity. The non-bank large-scale redemption support tool just announced on October 19 directly cuts off the cross-market contagion of "redemption鈥攕elloff."
So the significance of today's meeting is not about how much money it ultimately approves. It is about telling the market one thing: there is a counterparty for selling pressure, and there is a last guarantor for liquidity. For a market that has already fallen into a liquidity crisis, that one sentence is enough.
Where we are now
The official market rescue has indeed begun: Huijin has clarified its quasi-stabilization fund positioning and continues to expand ETF holdings; a non-bank redemption liquidity support tool was established on October 19; the central bank injected over 1 trillion yuan in a single day on October 27; 18 active ETFs collectively launched on October 23, and by October 30, 15 had raised 18 billion yuan; today, the three major regulatory bodies gathered at the central bank to study specific ways to provide money, and after market close, the central bank announced it would conduct swap facility operations tomorrow, with declared amounts exceeding 100 billion yuan (compared to 50 billion and 55 billion in the previous two rounds). The trajectory is clear 鈥?from verbal commitments, to providing tools, to providing money.
But overseas interference remains. Last Friday, U.S. stocks closed broadly lower, with the Dow down 1.09%, the S&P 500 down 1.82%, and the Nasdaq down 2.86%; earnings from Intel and Amazon weighed on AI-related trades; Brent crude oil remained at a high of $117 per barrel; progress in U.S.-Iran negotiations remained uncertain; and China's October manufacturing PMI fell back to 49.3%, slipping below the boom-or-bust line. These factors continue to pressure A-shares in the short term, especially the hardest-hit tech stocks.
From historical experience, after such symposiums conclude, the market often needs about a week to grind through 鈥?as mentioned in point five above, after the central bank's statement in March 2026, the Shanghai Composite was still down 6.9% over ten trading days, and the ChiNext and STAR 50 could not immediately recover. The policy bottom leading the market bottom by one to three months is the standard script for A-shares, and expecting a single bullish candle to complete a reversal is unrealistic.
But even with these pains, when the official rescue has formally begun and the central bank is already seated at the table, investors should not doubt that a rebound is on its way. On specifics: today's gap-up is not worth chasing; banks and coal stocks are actually declining, indicating that funds are rotating between high and low positions, and back-and-forth during this process is normal. The main direction of the rebound remains in the hardest-hit areas 鈥?the historical data speaks for itself: with the same rescue signals, the one-year elasticity and win rate of the ChiNext and STAR 50 are far better than the Shanghai Composite. Dividend assets should be watched for catch-up declines. Do not go all-in at once; this week's Fed meeting and U.S.-Iran talks will both provide new signals.
Ultimately, when the central bank steps in, what it buys is never the index 鈥?it is the market's floor. Once the floor is locked in, only then can the ceiling be imagined. If you are confused about industry investing; if you are lost on how to find industry leaders and potential companies; if you feel helpless about sector volatility 鈥?then please scan the QR code to join us, access more detailed industry chain analysis and investment strategies, and follow Gelonghui Research Institute to seize opportunities in the investment wave and share in the dividends of the industrial revolution.
Comments