Chinese stocks appear to be stabilizing after a three-week plunge that saw China’s market benchmark Shanghai Composite Index fall nearly 32 percent from June 12 when Chinese stocks hit a seven-year peak. The collapse erased $3.5 trillion in value — nearly a third of the market’s total capitalization. Analysts and investors remain wary.
Mainland stocks rebounded on July 9-10 after the Chinese government intervened.
Chinese authorities cut interest rates, suspended initial public offerings, relaxed the rules for margin lending, and directed brokerages to buy stocks, backed by cash from the central bank. The government has also banned sales by executives and big shareholders.
The People’s Bank of China (PBOC) lowers interest rates and cuts the amount of cash that some banks need to hold in reserve to protect depositors—stimulus measures to boost cash flow in the economy and prop up slumping stocks.
The stock market rout continues. China’s Ministry of Finance says it may allow government pension funds to invest in stocks for the first time — a move that could inject as much as 1 trillion yuan ($161 billion) into the market.
The China Securities Regulatory Commission (CSRC) spokesman Zhang Xiaojun says investors should have “confidence” and disregard “irresponsible rumors.”
Shanghai and Shenzhen stock exchanges announce plans to cut stock transaction fees by 30 percent, starting in August.
After tightening rules in May for margin trading (i.e., borrowing money from stock brokers to buy stocks), the CSRC changes course and relaxes rules on margin trading. Government regulators say they will investigate possible stock market manipulation.
July 4 and 5
The China Securities Finance Corporation (CSFC) asks 21 Chinese securities brokers to create a stock market fund. They will invest up to 128 billion yuan ($20.61 billion) in Exchange Traded Funds (ETFs) that track high-quality ‘blue chip’ stocks.
The State Council suspends IPOs — a move to curb speculative investing in new stocks. 28 Chinese firms cancel plans to go public. Twenty-five Chinese mutual funds say they will invest their own capital, along with their customers’ money, to buy stocks.
The CSFC says it will buy more small-cap stocks.
The number of Chinese companies that suspend trading on mainland exchanges reaches more than 1,300. This freezes around 40 percent of the collective value of Chinese stocks.
Government regulators order state-owned enterprises (SOEs) not to sell shares. They also direct public companies, SOEs and their employees to buy stocks.
The China Securities Finance Corporation (CSFC) extends a line of credit to buy stocks to 21 brokerages. The brokerages can access 260 billion yuan ($41.9 billion) for purchasing Chinese stocks.
Chinese police start investigating rumors that “malicious short selling” contributed to the rout. A Xinhua microblog says this shows government authorities will “punch back” at possible criminal activity with a “big fist.”
Chinese stocks continue recovery—recouping around 5 percent of their value. Four state-owned assets management companies vow not to sell stocks while the market remains unstable.
Chinese stocks rebound for third consecutive day. Regulators launch new crackdown on margin trading. The CSRC, orders brokerages to sever ties with unlicensed companies that lend money for speculative margin trading.
China’s Ministry of Public Security announces that it has found “evidence to suspect that individual trading companies are illegally manipulating securities and futures exchanges.” In a one-sentence statement, the ministry says an investigation is still underway, but doesn’t identify any suspect firms.
In a move toward restoring normal market operations, regulators ease the moratorium on new share issues and announce 14 publicly traded companies will be allowed to raise money by selling stock. The China Securities Finance Corp. says shares it has bought will be transferred to China’s sovereign wealth fund in an apparent gesture to reassure investors they will not flood back into the market and depress prices.