Sun, Jul 05, 2015 page13

• Chinese brokers join stabilization effort

  SHANGHAI SINKING? Investors said Beijing’s tinkering with policy and rules to try to temper China’s stock market slide raises wider questions about capital markets

  • Reuters, BEIJING
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  China’s top 21 securities brokerages yesterday said they would collectively invest at least 120 billion yuan (US$19.3 billion) to help stabilize the nation’s stock markets after a slump of nearly 30 percent since the middle of last month.

  A flurry of official policy moves over the past week, including an interest rate cut and a relaxation of margin lending rules, has failed to arrest the sell-off, Chinese equities erasing more than US$2.8 trillion in value in three weeks.

  The rout in China’s highly leveraged stock market has become a major worry for global investors, who fear a meltdown could destabilize the world’s second-largest economy when its growth is already slowing.

  The brokerages, led by Citic Securities Co (中信證券), met yesterday in Beijing to discuss the market situation and expressed “full confidence” in the development of China’s capital markets, a statement on the Web site of the Securities Association of China said.

  120 BILLION YUAN

  “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, in blue-chip exchange-traded funds,” it said.

  The brokerages would not sell off holdings as long as the Shanghai Composite Index is below 4,500 points, the statement said.

  Shanghai’s SSE Composite Index fell 5.8 percent on Friday to end at 3,684 points.

  Listed securities companies among the 21 brokerages, along with their major shareholders, also would buy back shares, the statement said.

  Beijing has been struggling to find a policy formula to restore confidence in its stock markets.

  After the market close on Friday, the China Securities Regulatory Commission said China would cut initial public offerings and “capital raisings,” while supporting long-term investors entering the market to help stabilize prices.

  WATCHDOG PROBES

  The commission is also examining recent short-selling activity for stock-index futures amid the slump, people with knowledge of the matter said.

  The People’s Bank of China also rolled over 250 billion yuan of medium-term loans to banks late on Friday to ensure adequate liquidity in the system.

  Chinese stocks had more than doubled between November last year and the middle of last month, fueled largely by retail investors using borrowed money.

  Investors said Beijing’s constant tinkering with monetary policy and regulations to try to temper the stock market slide raises wider questions about whether China is ready to open up its capital markets and have more influence in the international financial system.

  Separately, China detailed a plan to use the Internet to rejuvenate traditional industries and boost flagging economic growth, China’s State Council said in a statement yesterday.

  “Internet Plus,” as the plan is called, aims to help the manufacturing sector optimize and better serve clients through technologies such as cloud computing and artificial intelligence, it said.

  Other areas that might benefit include agriculture, energy production and distribution, finance, medical care, logistics, e-commerce, transportation and environmental protection, it said.

  China is attempting to manage an economy growing at its slowest pace since the 2009 global recession. The Internet plan came as Beijing sought to de-emphasize debt-fueled investment growth and give consumers and services more prominence in the economy.

  China plans to upgrade and expand its existing infrastructure, from fiber-optic networks to satellite communications, to improve and boost data streaming ability, especially for remote and rural areas, the statement said.

  Additional reporting by Bloomberg
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