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You can find the current article at its original source at http://www.theguardian.com/business/2016/jan/05/china-bolsters-wobbly-markets-with-cash-and-hint-at-curbs-on-share-sales
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| China bolsters markets with $20bn injection and hints at curbs on share sales | |
| (about 1 hour later) | |
| The Chinese authorities have intervened to support the country’s stock markets with the central bank pouring cash into the financial system and the securities regulator suggesting it might restrict share sales by major shareholders. | The Chinese authorities have intervened to support the country’s stock markets with the central bank pouring cash into the financial system and the securities regulator suggesting it might restrict share sales by major shareholders. |
| Related: Opinion is divided on state of Chinese economy, but not on its importance | Related: Opinion is divided on state of Chinese economy, but not on its importance |
| The unexpected 130 billion yuan ($19.94 billion) injection by the central bank on Tuesday – the largest such move to encourage more borrowing since September – followed Monday’s 7% crash triggered a circuit breaker mechanism to suspend trading for the day. | |
| The measures helped Chinese mainland indexes recover quickly from a steep initial fall on Tuesday. The Shanghai Composite index was up slightly at 5.30am GMT after falling more than 3% at the opening. | |
| Elsewhere in Asia Pacific it was a similar picture with markets recovering after a wobbly start. The Nikkei in Japan was flat while the Kospi in Korea was up nearly 1%. The exception among major bourses was Australia where the benchmark ASX/S&P200 fell sharply by 1% at the opening and sank even further in later trade. | |
| However, markets in Europe and the US were expected to open higher on Tuesday, according to futures trading. | |
| Beijing’s intervention on Tuesday appeared timed to reassure Chinese retail investors, who are always sensitive to liquidity signals, that the bank would support the market with cash. | Beijing’s intervention on Tuesday appeared timed to reassure Chinese retail investors, who are always sensitive to liquidity signals, that the bank would support the market with cash. |
| The People’s Bank of China offered the liquidity in the form of what are known as seven-day reverse repos at an interest rate of 2.25%, according to the statement. | |
| China’s securities regulator said it was studying rules to regulate share sales by major shareholders and senior executives in listed companies. | China’s securities regulator said it was studying rules to regulate share sales by major shareholders and senior executives in listed companies. |
| This would address concerns that the end of a six-month lockup on share sales by major institutional investors timed for this Friday – and scheduled to free up an estimated 1.2 trillion yuan worth of shares for sale next Monday – would result in a massive institutional evacuation from stocks. | This would address concerns that the end of a six-month lockup on share sales by major institutional investors timed for this Friday – and scheduled to free up an estimated 1.2 trillion yuan worth of shares for sale next Monday – would result in a massive institutional evacuation from stocks. |
| The PBOC also published nine new financial service standards that will come into effect on 1 June, to protect consumers. | |
| The China securities regulatory commission also defended the functioning of the new “circuit breaker” policy that caused Chinese stock markets to suspend trade on Monday, triggering the mechanism on the very first day it came into effect. | The China securities regulatory commission also defended the functioning of the new “circuit breaker” policy that caused Chinese stock markets to suspend trade on Monday, triggering the mechanism on the very first day it came into effect. |
| While some analysts criticised the design of the circuit breaker, saying it inadvertently encouraged bearish sentiment, the regulator said the mechanism had helped calm markets and protect investors – although it said the mechanism needed to be further improved. | While some analysts criticised the design of the circuit breaker, saying it inadvertently encouraged bearish sentiment, the regulator said the mechanism had helped calm markets and protect investors – although it said the mechanism needed to be further improved. |
| Analysts and investors warned that the success of the interventions was not assured. Repeated and often heavy handed interventions by Beijing have kept stock valuations at what many consider excessively high given the slowing economy and falling corporate profits. | |
| “We’ve been waiting for a market drop like this for a long time,” said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management. | |
| “The economy is poor, stock valuation is still high, and the yuan keeps sliding. The market drop is overdue.” | |
| In a fresh sign that the Chinese economy has weakened, business magazine Caixin reported on Tuesday that China’s national rail freight volumes declined by a tenth in 2015, their biggest ever annual decline. | |
| Caixin, citing sources from the national railway administration, said rail freight volumes declined 10.5% year-on-year to 3.4bn tonnes in 2015. Volumes fell only 4.7 percent in 2014. |