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Chinese brokerages will buy $20 billion in shares to stabilize the plunging market

The top 21 security brokerages of China have vowed to invest at least 120 billion yuan, which is equivalent to $19.3 billion in an effort to stabilize the economy. This is a government-endorsed plan to recover the share market from plummeting furthermore, while country’s both stock exchanges suspended all further IPO of stock.china-share-market

There was a slump of 30 percent since mid June. There has been a string of rule making by the Chinese government lately to ease the economy. It included the cut down in interest rates and also a relaxation in the margin lending rules.

The global investors are wary of China’s stock market rout. They are worried about the fact that the meltdown could destabilize the second largest economy of the world at the time when the growth is already very slow.

The Chinese brokerages held a meeting on Saturday in Beijing for discussing the situation of the market and expressed confidence in the growth of the capital markets of China.

The website of the Securities Association of China stated, “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.”

Zhang Shuyu, a finance researcher with the University of International Business and Economics, said the brokers’ move will likely cushion the downward pressure on the market.

The brokerages are not planning to sell off their holdings unless the Shanghai Composite Index comes below 4,500 points. It is important to note that the SSEC index fell down by 5.8 percent on Friday and ended at 3,684 points.

The security companies that are listed among the 21 brokerages will also buy back shares, according to the statement by the Securities Association of China. Beijing is trying hard to instill confidence in its stock markets by finding a policy formula that clicks.

The China Securities Regulatory Commission stated that it would regulate and cut down initial public offerings and instead support the long term investors who intend to enter the market. They are doing so in order to stabilize the prices.

Investors are of the belief that constant tampering with monetary policy and regulations to evade the stock market slide raises eyebrows on whether China is actually ready to open up its capital markets or not.

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About David Mayor

Writer and editor of The Next Digit Media, he takes care of iOS, Apple, Mac and other gadgets. He worked at Apple Inc, before joining to TND Media. He was graduated in Bachelor of Journalism & Mass Communication Degree from Cambridge University. All posts by David

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