China Brokerages To Buy $19.3 Bn In Shares To Stabilize Market
JULY 4 2015
21 major securities brokers in China convened on Saturday in Beijing, vowing to “firmly” stabilize the country’s stock market, which has been shaken by continued plunges.
“Twenty-one securities brokerages will jointly invest 15 percent of net assets as of the end of June, or no less than 120 billion yuan ($19.3 billion), in blue chip exchange traded funds,” a statement on the website of the Securities Association of China said.
These firms will not sell the stocks they held as of July 3 and will buy more, at their own digression, when the benchmark Shanghai Composite Index is below 4,500 points.
They will also actively repurchase stocks in their own company from the market and encourage major stock holders to increase their stakes.
China’s top three brokers — CITIC Securities, Haitong Securities and Guotai Junan Securities — were among the 21 signatories of the statement.
The brokers’ meeting on Saturday is the latest attempt to break the market’s three-week losing streak, which has cut the benchmark Shanghai Composite Index by more than 28 per cent.
Last Saturday, China’s central bank lowered both the interest rate and reserve requirement ratio for banks to inject liquidity into the market.
On Wednesday, the Shanghai and Shenzhen stock exchanges announced a roughly 30-per cent cut in stock transaction fees.
On the same day, the China Securities Depository and Clearing Company announced a reduction in stock transfer fees by about 33 per cent from Aug. 1.
On Thursday, the China Securities Regulatory Commission (CSRC) said it will investigate suspected manipulation of the stock market.
On Friday, the CSRC said it will cut the number of IPOs in July in order to reduce the supply of stocks.
The rollout of supportive policies has failed to reverse the trend yet.
The Shanghai Composite Index dived 5.77 per cent on Friday to finish at 3,686.92 points from a peak of 5,178.19 points on June 12, falling below the psychological threshold of 3,700 points.
As worries arise that the continued plunges in the stock market will threaten China’s whole financial system, central bank governor Zhou Xiaochuan said earlier this week that “China will hold fast to the bottom line that no systemic or regional financial risks should occur.”