On Friday, Jan. 8, China's securities regulator promised to “appropriately manage” the pace of new share sales as a way of stabilizing investors’ expectation, underscoring its need to contain more fluctuations after the market rebounded.
The announcement comes after the benchmark Shanghai Composite Index suffered a 10-percent loss in a week, with market shutdowns on Monday and Thursday because of the circuit breaker system.
According to China Daily, the Shanghai Composite Index dropped by 1.97 percent following the securities administration suspending the controversial circuit breaker system the night before. The authorities blamed the system for worsening liquidity crunch in the market.
China Securities Regulatory Commission spokesman Deng Ge said during a news convention that the regulator will appropriately arrange the new share sales according to the principle of improving trading vitality and stabilizing the market.
As a way of alleviating concerns about the huge new Initial Public Offerings (IPO) draining market liquidity, Ge pointed out that the launch of the long-awaited registration-based IPO mechanism will not happen on March 1 as initially announced.
Since the Chinese market faced first-time volatility in the past week, the regulator has put in place measures to allay investors' anxiety, including scrapping the circuit breaker system and limiting share sales by major players of listed corporations to no more than 1 percent of their firms' total shares within three months.
According to Worldwide News, chief strategist at investment bank BOCOM International, Hong Hao, said: "The circuit breaker is a magnifier, but not trigger, of market volatility. Suspension of the mechanism should decelerate the decline in A shares to reflect China's weakening fundamentals. But it will not reverse the decline."
On the other hand, state-controlled funds stepped into the market by buying stocks on Friday, increasing fiscal shares and those with large weightings in benchmark indexes.
Although it was fascinating that the national team of state institutions will continue purchasing stocks, some critics asserted that the rebound could be short-term, given that investors have been unable to get any positive aspects in the economic principles.
However, it was a relief to investors when the renminbi's decline for eight successive days ended on Friday, displaying the dedication to maintain the currency's stability on the side of the Chinese fiscal authorities.