In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China's state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.
China cuts the margin rate, supplies liquidity, temporarily suspends IPOs, and re-instutues the specialist function. Markets stabilize.
On Sunday, China state-owned investment company Central Huijin said it had recently been buying exchange-traded funds and would keep doing so.
The aim was to signal to China's army of retail investors, who conduct around 85 percent of share transactions, that the government is standing behind the market.
Analysts cautioned, however, that the latest policy moves may only bring short-term relief.
"The government measures are only aimed at stabilizing the market, and providing an exit for those who want to get out," said Liu Li, analyst at Shanxi Securities Co.
"Theoretically, the central bank's money is unlimited, but you cannot expect the government to use public money to buy shares which are still expensive, such as ChiNext shares."The headline should be, "China conducts orderly correction to prevent panic."
Wasn't that what the US government did at the time of the GFC? Why are Westerners mocking China for it now?
Reuters
Chinese stocks rise after Beijing unleashes emergency support
Samuel Shen
