This week, the People's Bank of China introduced bold stimulus measures, lowering interest rates, reserve requirements to stimulate the market, while also lowering mortgage rates. On Wednesday (September 25), the Chinese stock market continued its rebound.

On Tuesday (September 24), exchange-traded funds (ETFs) favored by Chinese sovereign funds experienced a significant increase in inflows, indicating that state funds may have played a role in the largest A-share rally since mid-2020.

According to Bloomberg-tracked data, the total inflow of eight ETFs rose to 13 billion yuan (1.9 billion US dollars), the highest level since July, when state-backed investors actively entered the market during an important political conference. On Tuesday, the CSI 300 index rose by over 4%, as the People's Bank of China introduced a series of stimulus measures to support the economy. The benchmark index continued to rise on Wednesday.

Funds flowed particularly into the largest domestic ETF, driving the market cap of the Huatai-PineBridge CSI 300 ETF to a historical high of 311 billion yuan. This product is seen as a key target for the "national team" in boosting the stock market, with its market cap having grown by about 150% this year. Another heavyweight ETF - China Asset Management's CSI 300 ETF - also more than quadrupled in market cap to around 211 billion yuan.

Due to the influx of state funds and increased interest from retail investors in these products, these ETFs have become convenient tools for bottom fishing, driving up their value.

At the highly anticipated press conference yesterday, the People's Bank of China announced a series of measures, stating that it would cut the reserve requirement ratio for bank deposits by 50 basis points, while also reducing mortgage rates to stimulate weak economic growth.

Kyle Rodda, Senior Financial Market Analyst at Capital.Com, believes these measures are quite bold, although not considered "explosive" stimulus policies, they are mainly aimed at the financial markets and supporting the banking system, making them very bullish for investors.

Bloomberg's Chief Asia Economist, Shuchang, said this will be a memorable day in the history of China's monetary policy, as the central bank has introduced a series of measures, from rate cuts to reserve requirement reductions, each step is significant.