BEIJING — China’s state-owned margin trading service provider will support the tumbling stock market by increasing share purchase and offering brokers liquidity aid, the country’s top securities watchdog said on July 8.
China Securities Finance Corporation Limited (CSF) will purchase more shares of small- and medium-sized listed companies to ease stock market liquidity, said Deng Ge, a spokesperson for the China Securities Regulatory Commission (CSRC).
The CSF will also continue to maintain the stability of blue chip stock prices and offered 260 billion yuan ($41.89 billion) of stock-secured credit for 21 brokerage firms to conduct self-run share purchasing on the market on July 8, Deng said.
The moves are aimed at helping market transactions resume as normal as “investors’ panic and irrational sell-offs caused a liquidity strain on the stock market,” according to Deng.
China’s stock market has been in a downward spiral since hitting a peak in June, with the benchmark Shanghai Composite Index shedding more than 30 percent.
The government has rolled out a streak of supportive measures, including asking 21 major securities brokers to spend 128 billion yuan on exchange traded funds (ETF) that track the performance of blue chip stocks on July 6.
Those brokers are in normal and sound operation with plenty of capital and liquidity, Deng said, noting that the CSF will provide ample liquidity support for them.
The total net assets of the 21 securities firms now exceeds 800 billion yuan, while their combined net capital and high-quality liquid assets both stand above 600 billion yuan, he said.
The CSF is the only company in China that provides margin financing for securities firms. Its shareholders include the Shanghai and Shenzhen stock exchanges, several futures and commodity exchanges, as well as the China Securities Depository and Clearing Co., Ltd.