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China Brokerages Pledge to Buy $19.3b in Shares
World Economy

China Brokerages Pledge to Buy $19.3b in Shares

China’s top securities brokerages said on Saturday that they would collectively buy at least 120 billion yuan ($19.3 billion) of shares in a bid to stabilize the country’s stock markets after a slump of nearly 30% since mid-June.

The pledge follows near-daily official policy moves over the past week, including an interest rate cut and a relaxation of margin lending rules, that have so far failed to arrest the sell-off, which some market watchers fear could turn into a full-blown crash, Reuters reported.

The rout in China’s highly leveraged stock market has become a major worry for international investors, who fear a meltdown could further destabilize the global economy even as Greece risks crashing out of the European common currency.

China stocks had more than doubled over the past year, fueled in large part by investors using borrowed money to speculate on further gains.

The brokerages met on Saturday in Beijing to discuss the market situation and expressed “full confidence” in the development of China’s capital markets, a statement on the website of the Securities Association of China said.

“Twenty-one securities brokerages will jointly invest 15% of net assets as of the end of June, or no less than 120 billion yuan, in blue chip exchange traded funds,” it said.

The brokerages will not sell off holdings as long as the Shanghai Composite Index is below 4,500 points, the statement said.

 

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