FX.co ★ China makes concerted efforts to prevent stock market crash

China’s government called for an emergency meeting on how to prevent a full-blown crash of the stock market which had plunged by 30% in the last three weeks.
In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, China Securities Finance Corp. The company will be aided by a direct line of liquidity worth 120 billion yuan ($20 billion) from the central bank.
China’s authorities have to intrude on the stock market taking unprecedented measures. However, Shanghai Composite bounced 9% up on Monday opening and then retraced to the previous closure.
“After the 28 companies suspended their IPOs, there will be no new IPOs in the near term,” the China Securities Regulatory Commission said in a statement on Sunday night.
This measure was adopted with a view to extinguish panic on the market as private investors with no qualification represent 80% of it. It is hard to foresee how exactly this crowd will response to market developments as emotions set the tone in a turbulent situation.
Economists have not shaped the common view that China’s regulators are implementing truly efficient measures. Some of them are not sure that Beijing’s frantic efforts to stem the stock market rout will be eventually rewarded.