The market regulator announced on Friday it would limit initial public offerings – which disrupt the rest of the market – in an attempt to curb plunging share prices.
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The initiative is being billed as a sharemarket rescue fund.The State Council also announced the establishment of a 100 billion yuan ($A21.6bn) national insurance investment fund and the Asset Management Association of China said its members would buy units in their own funds and help stabilise the market.
Twenty one Chinese securities companies, in a statement released Saturday, said they would pledge no less than 120 billion yuan ($19.33 billion) to invest in Chinese stocks.
Brokerages have promised not to sell their new holdings as long as the Shanghai Composite Index is below 4,500 points, well above current levels of 3,684, Chien noted. The SSEC index fell 5.8 percent on Friday to end at 3684 points.
China’s recent stock market crash, wiping out about three trillion dollars in capital, could play havoc with the Chinese government’s economic reforms and dash hopes of stock markets being effective fundraising channel to encourage start-ups, experts have said.
The latest move comes as Chinese authorities are scrambling to stem a stock-market slide that officials fear could spread to other parts of the world’s second-largest economy.
According to company filings to the exchanges Saturday evening, 10 companies will suspend IPOs on the Shanghai Stock Exchange and 18 will do the same at the Shenzen Stock Exchange. Share prices have fallen almost a third since June 12, erasing more than $2 trillion of value and inflicting immediate hardship on millions of families who not only invested their savings but also borrowed heavily at steep interest rates to buy more shares. Moves to stabilize the market take time to transmit, the paper said on Weibo, China’s Twitter-like microblogging site.
The stock markets are dominated by retail investors. “During this process, investors should have confidence and patience, instead of losing their minds and not knowing what to do amid anxiety and panic”, it said.
“Main indexes will rise. I have ample cash at hand, and surely will buy”.
On Friday, the CSRC said it will cut the number of IPOs in July in order to reduce the supply of stocks.
Large IPOs have been cited as a reason for triggering the plunge, though only recently Beijing seemed intent on letting more sales proceed, perhaps in hopes that greater supply in the market would temper the sizzling rally without snuffing it out.
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Analysts said recent stock declines in China reflect investors’ unease about new margin-trading restrictions. “It might benefit blue-chip stocks, as investors may see them as value, but the bursting of the bubble in small-cap/tech stocks is likely to continue”.
