News / Business

China brokers to invest $19bn to curb market plunge

Saturday, 04 July 2015 6:14 PM [ Last Update: Saturday, 04 July 2015 6:14 PM ]

China's brokerage firms say they'll invest more than $19 billion in the country's stock markets to curb its precipitous fall.

China's 21 largest brokerage firms announced Saturday they would invest more than $19 billion in the country's stock markets in order to curb its precipitous fall over the last three weeks.

The brokers will spend at least 120 billion yuan ($19.3 billion) on so-called "blue chip" exchange traded funds (ETFs), AFP quoted the Securities Association of China as saying in a statement after an emergency meeting in Beijing.

The group promised to act "firmly" to stabilize local markets, after a spate of official policy moves to stop the sell-off.

The Shanghai stock market has plummeted by almost 30 percent over the past three weeks. On Friday the Shanghai Composite Index closed down 5.77 percent to end at 3,686.92 points.

Experts fear it could turn into a full-brown crash introducing even more uncertainty into global markets as Europe teeters on the edge of a potential exit by Greece from the eurozone.

The $19 billion investment represents 15 percent of the brokerages' combined net assets.

The firms said they would not sell the stocks they held on July 3 and would continue to buy more as long as the benchmark index remains below 4,500 points.

The move follows an announcement by the market regulator Friday to limit initial public offerings (IPOs) in an attempt to curb plunging share prices.

IPOs in China disrupt the rest of the market as official restrictions mean almost all of them go up 44 percent on their first day of dealings -- so investors drain existing holdings to try to secure the near-guaranteed profits.

The volatility is not linked to the ongoing crisis in Europe. Shanghai had swelled by 150 percent in the last 12 months and experts had expected a sharp correction.

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