Business / Markets

China brokers pledge 120b yuan to stabilize stock market

(Xinhua) Updated: 2015-07-04 14:37

China brokers pledge 120b yuan to stabilize stock market

A Chinese investor watches the stock trend on the cell phone at a stock brokerage house, July 3, 2015.[Photo/IC]

BEIJING - China's 21 major securities brokers convened on Saturday, vowing to "firmly" stabilize the country's stock market, which has been shaken by continued plunges.

The brokers will spend no less than 120 billion yuan (19.62 billion US dollars), or 15 percent of their total net assets, on exchange traded funds (ETF) that track the performance of blue chip stocks, according to a joint statement.

These firms will not sell the stocks they held as of July 3 and will buy more, at their own digression, when the benchmark Shanghai Composite Index is below 4,500 points.

They will also actively repurchase stocks in their own company from the market and encourage major stock holders to increase their stakes.

China's top three brokers -- CITIC Securities, Haitong Securities and Guotai Junan Securities -- were among the 21 signatories of the statement.

The Securities Association of China said in a statement that it appreciated the brokers' decision and asked all brokerages to view the economic situation and capital market in a correct way and take similar actions to underpin the ailing market.

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 brokers' meeting on Saturday is the latest attempt to break the market's three-week losing streak, which has cut the benchmark Shanghai Composite Index by more than 28 percent.

Last Saturday, China's central bank lowered both the interest rate and reserve requirement ratio for banks to inject liquidity into the market.

On Wednesday, the Shanghai and Shenzhen stock exchanges announced a roughly 30-percent cut in stock transaction fees.

On the same day, the China Securities Depository and Clearing Company announced a reduction in stock transfer fees by about 33 percent from Aug. 1.

On Thursday, the China Securities Regulatory Commission (CSRC) said it will investigate suspected manipulation of the stock market.

On Friday, the CSRC said it will cut the number of IPOs in July in order to reduce the supply of stocks.

However, the steady drumroll of supportive policies has failed to reverse the trend.

The Shanghai Composite Index dived 5.77 percent on Friday to finish at 3,686.92 points from a peak of 5,178.19 points on June 12, falling below the psychological threshold of 3,700 points.

As worries arise that the continued plunges in the stock market will threaten China's whole financial system, central bank governor Zhou Xiaochuan said earlier this week that "China will hold fast to the bottom line that no systemic or regional financial risks should occur."

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