China's top brokerages and fund houses agree on plan to restore stability to plunging stock markets
Twenty-five leading brokerages and mutual fund houses agree to a raft of measures in a bid to bring stability to the mainland markets
Mainland authorities yesterday called on the country's largest brokerages and major mutual fund houses to work together to prop up the nation's stock markets after a slide of nearly 30 per cent in just three weeks.
Senior executives of 25 major mutual fund houses promised to boost equity fund assets under management by injecting their firms' own capital into the funds, the Asset Management Association of China said in a statement on their website after a meeting in Beijing.
The statement said the fund houses would roll out new equity funds, and in a move likely aimed at reducing volatility in a market where institutions regularly take intraday positions, the fund houses committed to holding stocks for at least one year or more.
And last night, Xinhua reported that 28 companies had agreed to withdraw their initial public offerings (IPOs) that had already been approved by the Shanghai and Shenzhen trading authorities because of the fluctuations of the past few weeks.
The two announcements were made just hours after the mainland's 21 largest brokerages agreed to pool a 120 billion yuan (HK$150 billion) fund aimed at propping up the stock market, according to a joint announcement issued by the Securities Association of China.
The SAC said brokerages had also pledged not to sell shares in their own proprietary trading accounts so long as the Shanghai Composite Index stayed below the 4,500-level - 22 per cent above Friday's close of 3686.92 - and to begin share buybacks to boost their own stock price.
Market heavyweights Citic Securities, Guotai Junan Securities and Haitong Securities attended the meeting, which was reportedly chaired by China Securities Regulatory Commission head Xiao Gang.
The move to put a floor under the market comes after panic selling wiped out US$2.8 trillion in market value, while near daily attempts at restoring investor confidence, including lending rate cuts, a reduction in new listings, and bullish state media editorials, have so far failed.
The desperation in the market was highlighted by that Premier Li Keqiang - who only returned from Europe two days ago - had chaired a State Council meeting on the issue.
According to report carried by financial news magazine , the State Council meeting had decided to suspend all public offerings on mainland markets. Only one day before, the CSRC said it would limit the number of new mainland listings.
The report about the high-level meeting was not confirmed officially by official news agencies.
But the report was widely circulated on the mainland, this showed a desperate market atmosphere.
Market analysts were generally cautious about whether yesterday's moves would engender confidence as stocks are still expensive and the brokerage fund represented only around 15 per cent of recent daily trading volumes.
"It would be helpful, but it needs wait and see how useful it would be to stop the panic sell-off in the China stock market," said Ronald Wan, Chief Executive of Hong Kong-based Partners Capital International Limited in Hong Kong.
"The majority of the Chinese stock market is individual investors driven, and now their confidence is collapsing," Wan said.
