PBoC makes extraordinary move to assist investors
(8 July 2015 – China) In an extraordinary move, the People’s Bank of China (PBoC) has begun to lend money to investors to buy shares in the stock market, where a sudden crash since June has seen A$3.2 trillion wiped from the value of Chinese shares in just three weeks.
This liquidity assistance will be provided to the regulator-owned China Securities Finance Corp, which will lend the money to brokerages, which will in turn lend to investors, according to a report by the Wall Street Journal.
This intervention marks the first time funds from the central bank have been directed anywhere other than the banks, signalling serious concern from authorities.
At the same time there has been a limit put on initial public offerings.
On 4 July, China’s 21 largest brokerage firms announced that they would invest more than A$25.35 billion in the country’s stock markets to curb the declines.
The brokers will spend at least 120 billion yuan (A$25.75 billion) on “blue chip” exchange traded funds, the Securities Association of China said in a statement after an emergency meeting in Beijing.
On 3 July the Shanghai Composite Index closed down 5.77 percent to end at 3,686.92 points.z
Since peaking on 12 June, Shanghai has dropped nearly 29 percent, which Bloomberg News said was its biggest three-week fall since November 1992.
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