New Stock Market Stabilization Measures Discussed

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Early on Tuesday, Chinese stocks surged as policymakers discussed a set of steps to steady the falling market. Authorities are attempting to raise roughly 2 trillion yuan ($278 billion) as part of a stabilisation fund in order to purchase shares onshore through the Hong Kong exchange connection, which has caused the Hang Seng China Enterprises Index to climb higher by 3.8%. Furthermore, authorities have additionally set aside a minimum of 300 billion yuan, or $41.7 billion, from local funds to purchase onshore shares via Central Huijin Investment Ltd. or China Securities Finance Corp.

Premier Li Qiang’s appeal for “forceful” efforts to stabilise prices and calm investors caused stocks in Hong Kong and mainland China to soar, stopping a US$1 trillion sell-off this month. Recently, Chinese markets have seen more difficult conditions amid a loss of confidence from foreign investors. With international funds have taken out almost US$30 billion from onshore-listed stocks in the last six months through stock connect linkages. Concerns have also been raised about the consequences of the so-called snowball derivatives reaching mass knock-in levels, which observers of the market claim have prompted selling of equity futures for purposes of hedging.

DISCLOSURE: All our E.F team members come from an investment background. Apart from writing articles about companies, investments and financial instruments, we also invest in most of them. Please read our terms of use for more details.

E.F Team

Our team at Eastern Finance is made up of young and knowledgeable professionals who are here to provide you with business news from an eastern perspective.

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