The benchmark Shanghai Composite Index has shed more than 30 percent. “As a result, support is likely to remain extraordinary, although that will find difficulty reversing the rapid shift in attitudes by retail investors”.
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The CSRC, which has been playing a pivotal role to revive mainland stock markets, said last night that senior management of listed firms, holding at least a 5 percent stake in their companies, are now forbidden from selling shares in the next six months. It has directly bought large cap A-shares in an attempt to stabilise the market.
On the same day, around 500 Chinese firms listed in the stock market announced that they will refrain from selling their own shares to stop their value from sliding further.
The People’s Bank of China in Beijing. Qualified insurers will be allowed to invest up to 10 percent of their assets in a single blue chip, up from 5 percent and they may raise total equity holdings to 40 percent, from the current 30 percent.
China’s state asset administrator told central government owned firms on Wednesday that they should not sell shares in their own listed companies during “unusual market volatility”, as Chinese stocks continue to plunge despite a series of emergency support measures from Beijing.
The central bank statement was read on state TV’s national midday news. On Monday, the flagship Communist Party newspaper, People’s Daily, said the economy can main steady growth and provide “solid fundamentals” for “healthy development of capital markets”.
Professor Liu Yuhui at the Chinese Academy of Social Affairs interpreted the central bank’s action as offering unlimited liquidity to the stock market until it gets back on an even keel. It has made profits for some traders but many novice investors who piled in just before the peak hold shares that are worth less than they paid. The rescue plan announced announced over the weekend focuses on helping blue chips and did not pay much attention to small counters that led to panic selling in those companies.
The weekend announcements included a pledge by state-owned brokerages to buy blue-chip stocks, or shares in major state companies. Dozens with shares traded in Hong Kong also have requested suspensions.
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In addition, a total of 28 companies were already approved to suspend their IPO operations on the Shanghai and Shenzhen stock exchanges, and started to return subscription funds to investors. It said more asked to be suspended later Tuesday, raising the total to more than 1,000.
