China curbs IPOs, enlists brokers in all-out bid to end market rout
By Michael Martina and Samuel Shen
BEIJING/SHANGHAI (Reuters) - China froze share offers and set up a market-stabilization fund on Saturday, the Wall Street Journal said, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world's second-largest economy.
Beijing's reported suspension of initial public offers (IPOs) came a few hours after extraordinary announcements by major brokers and fund managers, which collectively pledged to invest at least $19 billion of their own money into stocks.
China's government, regulators and financial institutions are now waging a concerted campaign to prop up the nation's two main share markets, amid fears that a meltdown would rock the financial system and inflict heavy losses across an economy where annual growth is already running at a 24-year low.
Almost $3 trillion in market value - more than the entire economic output of Brazil - has been wiped out since markets went into reverse last month, posing a bigger headache for many global investors than even the Greek debt crisis.
The main Shanghai Composite Index .SSEC has lost around 30 percent of its value in three weeks, a dramatic end to an equally breathtaking rally that saw it more than double in just seven months, fuelled by official interest-rate cuts.
The sell-off is especially worrying because the bull market had been built on a mountain of speculative loans. Some analysts suggest total margin lending, both formal and informal, could add up to around 4 trillion won ($3.6 billion).
The stock markets are dominated by retail investors.
China's top brokerages said on Saturday they would collectively buy at least 120 billion yuan ($19.3 billion) Continued...