This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/business/2015/jul/05/china-freezes-new-share-offers-in-bid-to-shore-up-plunging-stock-markets
The article has changed 2 times. There is an RSS feed of changes available.
Previous version
1
Next version
Version 0 | Version 1 |
---|---|
China freezes new share offers in bid to shore up plunging stock markets | China freezes new share offers in bid to shore up plunging stock markets |
(about 5 hours later) | |
China has frozen share offers and set up a market-stabilisation fund, according to reports, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world’s second-largest economy. | China has frozen share offers and set up a market-stabilisation fund, according to reports, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world’s second-largest economy. |
The Wall Street Journal report that Beijing has suspended initial public offerings (IPOs) came a few hours after major brokers and fund managers collectively pledged to invest at least $19bn of their own money into stocks. | The Wall Street Journal report that Beijing has suspended initial public offerings (IPOs) came a few hours after major brokers and fund managers collectively pledged to invest at least $19bn of their own money into stocks. |
Related: Margin calls fuel China's dramatic stock market collapse | Related: Margin calls fuel China's dramatic stock market collapse |
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. | 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. |
A 29-year-old man who allegedly spread rumours about people in Beijing jumping off buildings in response to a stock market crash has been arrested, China Central Television said on Sunday. | |
Named only as Tian, he allegedly wrote on social media on 3 July that “there are people, because of the stock market crash, who have jumped off buildings in Beijing’s Financial Street,” a commercial development in the centre of the city that houses many financial institutions. | |
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 has lost around 30% 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 main Shanghai Composite Index has lost around 30% 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 yuan ($645bn). | 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 yuan ($645bn). |
The stock markets are dominated by retail investors. | The stock markets are dominated by retail investors. |
China’s top brokerages said on Saturday they would collectively buy at least 120bn yuan ($19.3bn) of shares. Their statement was posted on the website of the Securities Association of China. Associated Press reported. | China’s top brokerages said on Saturday they would collectively buy at least 120bn yuan ($19.3bn) of shares. Their statement was posted on the website of the Securities Association of China. Associated Press reported. |
The pledge would form part of Beijing’s new stabilisation fund, according to the Wall Street Journal. | The pledge would form part of Beijing’s new stabilisation fund, according to the Wall Street Journal. |
Separately on Saturday, 25 Chinese mutual funds announced they too would put their own capital into stocks. | Separately on Saturday, 25 Chinese mutual funds announced they too would put their own capital into stocks. |
The fund managers did not give a figure but said they would invest into their own funds, alongside their customers. | The fund managers did not give a figure but said they would invest into their own funds, alongside their customers. |
Later, 28 Chinese firms announced in individual statements they would suspend their own IPO plans due to market volatility. They did not mention any central decision to halt IPOs. | Later, 28 Chinese firms announced in individual statements they would suspend their own IPO plans due to market volatility. They did not mention any central decision to halt IPOs. |
The securities regulator had already said on Friday it would reduce the number of IPOs and other capital-raisings. | The securities regulator had already said on Friday it would reduce the number of IPOs and other capital-raisings. |
The freezing of IPOs can lend support to a falling market because large amounts of money are frozen when subscriptions are taken, drying up liquidity in the market. Large IPOs have been cited as a reason for triggering the recent plunge. | The freezing of IPOs can lend support to a falling market because large amounts of money are frozen when subscriptions are taken, drying up liquidity in the market. Large IPOs have been cited as a reason for triggering the recent plunge. |
Beijing has unleashed a barrage of official policy moves over the past week, including an interest rate cut, a relaxation of margin-lending rules and additional bank liquidity. | Beijing has unleashed a barrage of official policy moves over the past week, including an interest rate cut, a relaxation of margin-lending rules and additional bank liquidity. |
But these efforts have so far failed to convince investors. | But these efforts have so far failed to convince investors. |
Hong Hao, strategist at BOCOM International, doubted the move by brokers alone would be enough to stabilise share prices, unless even more leverage was added to the market. | Hong Hao, strategist at BOCOM International, doubted the move by brokers alone would be enough to stabilise share prices, unless even more leverage was added to the market. |
“Around 120bn yuan is not enough, but if leverage [more borrowing] is used, it could expand to over 500bn yuan and that may have some effect,” he said. | “Around 120bn yuan is not enough, but if leverage [more borrowing] is used, it could expand to over 500bn yuan and that may have some effect,” he said. |
In a statement, the Securities Association of China expressed “full confidence” in the development of China’s capital markets and said the brokerages would jointly invest 15% of net assets as of end-June, “or no less than 120bn yuan”, in blue-chip exchange traded funds. | In a statement, the Securities Association of China expressed “full confidence” in the development of China’s capital markets and said the brokerages would jointly invest 15% of net assets as of end-June, “or no less than 120bn yuan”, in blue-chip exchange traded funds. |
The brokerages would not sell as long as the Shanghai composite remained below 4,500 points. The index fell 5.8% on Friday to end at 3,684 points. | The brokerages would not sell as long as the Shanghai composite remained below 4,500 points. The index fell 5.8% on Friday to end at 3,684 points. |
Listed securities companies among the 21 brokerages also pledged to buy back shares, along with their major shareholders. | Listed securities companies among the 21 brokerages also pledged to buy back shares, along with their major shareholders. |
The Asset Management Association of China promised to hold their additional stock investments for at least a year and to also speed up the application and issuance of equity funds. | The Asset Management Association of China promised to hold their additional stock investments for at least a year and to also speed up the application and issuance of equity funds. |
Just a few months ago, state media had been encouraging the market’s giddy rise, saying China’s bull market had just begun and denying that it was in a bubble. Investors big and small took that as a government signal to buy. | Just a few months ago, state media had been encouraging the market’s giddy rise, saying China’s bull market had just begun and denying that it was in a bubble. Investors big and small took that as a government signal to buy. |
Now, Beijing is struggling to restore confidence before too much economic damage is done. | Now, Beijing is struggling to restore confidence before too much economic damage is done. |
Weighed down by a property downturn, factory overcapacity and high levels of local government debt, economic growth had already been expected to slow to around 7% in 2015, robust by global standards but its weakest annual expansion in a quarter of a century. | Weighed down by a property downturn, factory overcapacity and high levels of local government debt, economic growth had already been expected to slow to around 7% in 2015, robust by global standards but its weakest annual expansion in a quarter of a century. |
Previous version
1
Next version