Banks to Provide Liquidity to Help Stabilize Stock Market

Banks to Provide Liquidity to Help Stabilize Stock MarketThe People’s Bank of China is providing ample liquidity in their efforts to help in the stabilization of the stock market. The bank will be working alongside China Securities Finance Corp. s State owned margin lender to obtain liquidity using loans and bonds. Furthermore the People’s Bank of China will do everything to prevent systematic risks.

The China Insurance Regulatory Commission is also increasing it limits for insurers in investing in blue chips stocks to 10 percent from 5 percent of total assets. All qualified insurers can increase their ratio of their equity assets to 40 percent from 30 percent of their total assets. State owned Assets Supervision and Administration Commission urged the 112 central State owned to purchase more shares in their companies. Plus China Securities Regulatory Commission prohibited major stockholders and executives of listed companies in selling stocks in their own firms for six months.

Also the China Financial Futures Exchange raised the margin requirement for future trading on the CSI 500 which tracks small and mid cap stocks up to 30 percent to curb speculative short selling. The China Securities Finance Corp. also granted loans of up to 260 billion yuan through stock collateral from 21 brokerage firms and allow them to purchase more shares.

The Ministry of Finance is encouraging State owned financial firms to increase holdings in listed companies as prices are at reasonable levels and promised not to reduce holdings in Chinese shares during volatility of the market.

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