Govt moves to shore up market

Two investors in a brokerage house in Jiujiang, Jiangxi province, were shocked by the A-share market's nearly 6-percent plunge on Friday. [Photo/China Daily]

Continuing plunge pushes Beijing to inject more liquidity

China's equities market has suffered the worst three-week loss since 1992 as the government keeps rolling out measures to stabilize a seemingly unstoppable slide.

The dramatic fall, wiping out $2.8 trillion in three weeks, further extended on Friday, with the benchmark Shanghai Composite Index dropping 5.7 percent, or 225.85 points, to close at 3,686.91.

To shore up the market, the China Securities Regulatory Commission told a news conference after the close on Friday that it will reduce the number of initial public offerings and the amount of funds to be raised to prevent new shares further draining liquidity.

The regulator also approved a capital injection of 76 billion yuan ($12.2 billion) into the China Securities Finance Co, a State-owned company specializing in providing margin loan services to brokerages, boosting its capitalization to 100 billion yuan and granting it greater capital power to stabilize the market.

The State Council on Friday approved the establishment of a 100 billion-yuan national insurance investment fund to invest in equities of listed and unlisted companies as well as bonds and equity funds.

The new moves came, as stocks continued their losing streak on Friday despite previous efforts, with the benchmark Shanghai index retreating by the biggest three-week decline since 1992.

The Shanghai Composite Index dived 5.8 percent to finish at 3,686.92 after swinging nearly 300 points, while the Shenzhen Component Index slumped 5.3 percent to 12,246.06.

About $2.8 trillion of market value has evaporated over the past three weeks, even as securities regulators failed to keep margin investors from unwinding positions at a record pace.

The outstanding balance of margin debts fell for a 10th day as of Thursday from a record high, according to Shanghai Stock Exchange.

"Though jettisons among margin traders may come to an end, the recent plunge in general triggered a pessimistic sentiment, which sent the markets on a downard spiral," said Yang Delong, chief strategist at China Southern Asset Management.

"Investors will come around, as regulators unleash more boosting policies," said Yang, adding that by sparing no effort to stem the plunge, State-owned financial institutions may step in with "real money" to buy shares.

Nearly 1,000 stocks sank to a daily halt on Friday, led by utility, environment and sports sectors.