China rolls out emergency measures to prevent stock market crash

Sun Jul 5, 2015 10:59am EDT
 
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By Pete Sweeney and Samuel Shen

BEIJING/SHANGHAI (Reuters) - China's stock markets face a make-or-break week after officials rolled out an unprecedented series of steps at the weekend to prevent a full-blown stock market crash that would threaten the world's second-largest economy.

The government is anxiously awaiting the market opening on Monday to see if the new measures will halt a 30 percent plunge in the last three weeks, or if panicky investors who borrowed heavily to speculate on stocks will continue to sell.

In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China's state-backed margin finance company which in turn would be aided by a direct line of liquidity from the central bank.

China has also orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

"After the 28 companies suspended their IPOs, there will be no new IPOs in the near term," the China Securities Regulatory Commission (CSRC) said in a statement on Sunday night.

An online survey by fund distributor eastmoney.com over the weekend, which polled over 100,000 individuals, said investors believed stock indexes would rise more than 5 percent on Monday. But many of those polled didn't think the bounce will last long.

"You're going to need the central bank to open the floodgates to take us back to 4,500 points in Shanghai," said an investment manager in Shanghai.

The Shanghai Composite Index was last at 4,500 on June 25, and is now trading 22 percent lower. [.SS]   Continued...

 
Investors talk in front of an electronic board showing stock information, filled with green figures indicating falling prices, at a brokerage house in Nantong, Jiangsu province, China, July 3, 2015. REUTERS/Stringer