China has unveiled several measures to stabilize its volatile stock market and counter further declines.
According to Reuters, China Securities Regulatory Commission (CSRC) lifted a requirement for investors to make additional guarantees if their margin ratio reaches 130% or they will be forced to sell their shares. At the same time, brokerages will be allowed to roll over margin trading contracts with clients.
The latest move is a reversal of its most recent policy, before the stock market rout in the last two weeks, when the regulators were tightening margin financing rules to prevent the then red-hot market from overheating.
The squeeze on margin financing, which largely funded the recent rally, was cited as one of the major reasons for the stock market downturn.
In a separate report, Xinhua news agency said China’s main stock exchanges, Shanghai and Shenzhen, will reduce transaction fees by an estimated 30% from August 1.
Xinhua also reported that the CSRC allowed stock brokerages to issue or transfer short-term corporate debts through private trading systems between institutions. The measure is aimed at giving brokerages more avenue to raise funds.
These measures were adopted on top of the PBOC’s move to simultaneously cut its policy rates and the reserve requirement ratio of banks over the weekend. The government will also allow the country’s pension fund to invest in stocks for the first time ever, while there were reports that state-backed institutions were infusing funds to Shanghai’s top four ETFs to prop up the market.
But it seems that these measures are not enough to calm the nerves of investors. According to MarketWatch, the Shanghai Composite Index was trading down 3.4%.
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