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Saturday, July 4, 2015, 15:11

Brokers pledge 120b yuan to stabilize Chinese stock market

By Xinhua

Brokers pledge 120b yuan to stabilize Chinese stock market
Investors check stock prices at a brokerage house in Jiujiang, Jiangxi province in China on July 3, 2015. (Hu Guolin/for China Daily)

BEIJING -- Twenty-one major securities brokers in China have pledged to stablilize the country's stock market, vowing to spend no less than 120 billion yuan (US$19.62 billion) on the exchange traded funds (ETF)  that track the performance of blue chip stocks.

The brokers will not sell the stocks they held on July 3 and buy more at a proper time so long as the benchmark Shanghai Composite Index is below 4,500 points, according to a joint statement issued after a meeting of the brokers on Saturday.

The money pledged accounted for 15 percent of their total net assets, the statement said.

They will also actively repurchase stocks in their own company from the market and encourage major stock holders to increase their stakes.

China's top three brokers -- CITIC Securities, Haitong Securities and Guotai Junan Securities -- were among the 21 signatories of the statement.

The Securities Association of China said in a statement that it appreciated the brokers' decision and asked all broker firms to view China's economic situation and capital market in a correct way and take similar actions to underpin the ailing market.

Zhang Shuyu, a finance researcher with the University of International Business and Economics, said the brokers' move will likely cushion the downward pressure on the market.

The brokers' meeting on Saturday is the latest attempt to break the market's three-week losing streak, which has cut the benchmark Shanghai Composite Index by more than 28 percent.

Last Saturday, China's central bank lowered both the interest rate and reserve requirement ratio for banks to inject liquidity into the market.

On Wednesday, the Shanghai and Shenzhen stock exchanges announced a roughly 30-percent cut in stock transaction fees.

On the same day, the China Securities Depository and Clearing Company announced a reduction in stock transfer fees by about 33 percent from Aug. 1.

On Thursday, the China Securities Regulatory Commission (CSRC) said it will investigate suspected manipulation of the stock market.

On Friday, the CSRC said it will cut the number of IPOs in July in order to reduce the supply of stocks.

However, the steady drumroll of supportive policies has failed to reverse the trend.

The Shanghai Composite Index dived 5.77 percent on Friday to finish at 3,686.92 points from a peak of 5,178.19 points on June 12, falling below the psychological threshold of 3,700 points.

As worries arise that the continued plunges in the stock market will threaten China's whole financial system, central bank governor Zhou Xiaochuan said earlier this week that "China will hold fast to the bottom line that no systemic or regional financial risks should occur."

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