China's biggest exchange-traded fund (ETF) jumped more than 6% on Monday in record turnover, in the clearest sign yet that money from Chinese brokerages, mutual funds and sovereign wealth funds could be flowing into blue chips as part of a rescue package unveiled over the weekend.
The China 50 ETF, which buys into shares of the 50 biggest companies listed in Shanghai, registered turnover of ¥24.9 billion ($4.01 billion), more than double the previous session.
The huge money inflows into the China 50 ETF, which has heavy exposure to financial and energy heavyweights, anchored investor sentiment in Monday's volatile trading session, and fueled speculation that Beijing's "stability fund" was at work.
In emergency rescue measures announced at the weekend, China's top 21 brokerages pledged to invest at least ¥120 billion ($19.33 billion) in blue chip ETFs while Central Huijin, a unit of China's sovereign wealth fund, said it had recently bought ETFs and would continue to do so.
In addition, China's securities regulator said the central bank would provide liquidity support to a state-owned margin finance company in a bid to stabilize the market.
Although none of the institutions disclosed their trading activities on Monday, heavy trading was seen in China's major blue chip ETFs.
Besides China 50 ETF, Shanghai's three other major ETFs, including Huatai-PB CSI300 ETF, China AMC CSI300 ETF and Hua An Shanghai 180 ETF also rose.
Stock components of the SSE 50 index, which the China 50 ETF tracks, rose sharply.
For example, China's top lenders, ICBC, Agricultural Bank of China and Bank of Communications surged more than 9%, while oil giant PetroChina rose by an upward daily limit of 10%. Chinese insurer Ping An, another component, rose 4.9%.
The rally in blue chips encouraged some investors.
Raymond Ma, portfolio manager of Fidelity Worldwide Investment, said he was encouraged by government efforts to stabilize the market.
"I start to see more value in oversold sectors, such as Chinese insurance companies, brokers and selected information technology plays," he said.
"At the current juncture, I will also accumulate quality stocks with sustainable growth on weakness."