Chinese authorities have announced measures to support investor sentiment such as liquidity boost by the central bank and more steps to regularize stock selling by major shareholders, after stock markets witnessed massive sell-off on Monday.
The People’s Bank of China on Tuesday pumped $19.94 billion or 130 billion yuan in its 7-day reverse repurchase operation, the biggest such injection since September. Funds were offered at 2.25 percent, the bank said on its website. Reports also suggested that state-owned investment funds intervened to support the equity market.
The Chinese stock market witnessed a 7 percent sell-off on Monday that led to suspending trade after the new “circuit breaker” was triggered on its very first day of introduction. The rout spread to the global markets, sparking declines.
A six-month long suspension of the sale of shares by major shareholders of listed companies, which came into effect on July 8 last year, is set to expire on January 8.
China’s securities regulator, the China Securities Regulatory Commission (CSRC), said it is exploring measures to regulate stock sales by major shareholders of listed companies to avoid massive selling that could cause abnormal fluctuations in the stock market.
The CSRC plans to encourage major shareholders of listed companies to reduce their stock holdings through other routes such as block trading and equity agreement transfer.
In recent years, 60 percent of holdings of major shareholders have been sold off via methods such as the block trading and transfer agreement, while only 0.7 percent was sold in the direct selling route.
The securities watchdog also defended the “circuit breaker,” saying it helps to stabilize markets. The CSRC also said that the system will undergo constant improvements.
The Chinese stock market stabilized in Tuesday’s trading after a fall at the opening.
“We think it will take strong policy response to reduce hard-landing worries and subsequently better activity data to restore investor confidence in risky assets,” analysts at ING Bank said.
The Chinese central bank lowered interest rates six times last year amid the slowdown in growth and the stock market rout. The bank also lowered the reserve requirement ratio several times and scrapped the upper limit on the floating interest rates on deposits for some banks in its latest move to liberalize deposit rates.
The material has been provided by InstaForex Company – www.instaforex.com