Equities in the Chinese mainland plummeted further on Wednesday, despite fresh efforts by government agencies to stop liquidity from fleeing the cash-strapped stock markets.
The benchmark Shanghai Composite Index closed 5.90% down at 3507.19 points while the Shenzhen Component Index lost 2.94% to close at 11040.89 points.
In fact, nearly half of all listed companies suspended trading in their shares on Wednesday in order to prevent further losses.
Earlier in the day, China’s central bank, the People’s Bank of China (PBoC), announced that it will “actively assist” the China Securities Finance Corporation (CSF), the national margin-trading service provider, with acquisition of “sufficient liquidity.”
Fred Teng on Chinese stocks
For an assessment of the market sell off in China, CCTV America’s Asieh Namdar spoken with Fred Teng, Director of the Hong Kong Association of New York.
Fred Teng on Chinese stocksFor an assessment of the market sell off in China, CCTV America's Asieh Namdar spoken with Fred Teng, Director of the Hong Kong Association of New York.
With the central bank’s help, the CSF has provided 260 billion yuan worth of credit to 21 brokerages in exchange for stocks pledged by them, according to a spokesman for China Security Regulatory Commission (CSRC), the country’s stock market watchdog.
In the meantime, the CSRC has also called on the CSF to buy more shares from smaller firms so as to curb the downward spiral in the tech-heavy Shenzhen Stock Exchange.
The statement came as a massive amount of liquidity has already been poured into blue-chip counters, i.e., big and financially recognizable firms, listed in the Shanghai Stock Exchange. That has resulted in investors complaining that medium-sized firms and start-ups have been left unattended.
Along with the above, the CSRC has also urged the big shareholders of listed companies to buy more of their companies’ stock.
Meanwhile, China’s insurance market watchdog, China Insurance Regulatory Commission has announced that insurance companies can now hold an increased stake in blue-chip firms. They are now being permitted to hold shares of blue-chips amounting to 10% of their own assets, up from the earlier limit of 5%.
In addition to these measures, the country’s state-owned enterprises have been banned by China’s SoEs watchdog from selling their own shares until the current market volatility subsides.