The China Securities Regulatory Commission (CSRC) will introduce new policies to prevent market plunge and stabilize the market. (Photo : www.english.caixin.com)
The China Securities Regulatory Commission (CSRC) is set to reduce both the number of initial public offerings and offering sizes in a bid to prevent further decline of the market and stabilize it, the China Daily reported.
Zhang Xiaojun, spokesman of the CSRC, said that the China Securities Finance Corporation (CSF), which provides margin loan services to brokerages, will also help boost the registered capital from 24 to 100 billion yuan to help stabilize the market.
The new policies and solutions were made after stocks had a losing streak since July 3, Friday, and the benchmark Shanghai index made its biggest three-week decline since 1992.
The Shanghai Composite Index fell 5.8 percent to finish at 3,686.9, while the Shenzhen Component Index dropped 5.3 percent to 12,246.06.
According to Shanghai Stock Exchange, the outstanding balance of margin debts dropped for a 10th day on July 2, Thursday, from a record high.
"Though jettisons among margin traders may come to an end, the recent plunge in general triggered a pessimistic sentiment, which sent the markets on a downward spiral," Yang Delong, chief strategist at China Southern Asset Management, said.
Yang added that state-owned financial institutions may help with "real money" to buy shares, as part of the all-out efforts.
The report said that nearly 1,000 stocks fell as the market closed on July 3, led by utility, environment and sports sectors.
According to statistics compiled by Bloomberg, more than $34 billion were wiped out in June in the worst monthly slump in Chinese stocks in two years.
The country's securities watchdog pledged over the past week that it would ease margin trading rules and investigate market manipulation. CSRC said that it will examine short-selling activities for stock-index futures for suspected manipulation.
The securities watchdog released on July 1 the amended rules on margin trading, whose draft were scheduled to be on public consultation until July 11.
The amendment allows brokerages and margin investors to decide when and how much percentage of additional guarantees should be put, instead of the compulsory sell-out.
Under the amendment, brokerages can extend contracts with their clients provided the maximum term is under six months.
CSRC also announced that it will allow brokerages to issue bonds and explore securitization of margin trading business to provide more room for their funding channels.
