By Lauren Dodillet
21 Chinese securities companies led by Citic Securities Co. are pledging more than $19 billion dollars to a fund that will help stabilize the market. The fund, which opened Monday morning, is valued at approximately 15 percent of its contributors’ net assets. Their July 4 joint statement also announced the companies’ pledge to continue investing in the market under the condition that the Shanghai Composite Index (the Chinese version of the Standard & Poor Index that measures the value of the market) remains below 4,500. The Chinese market closed on Friday at 3,686.
The State Council has taken action to counteract the market’s recent trend by ordering 28 companies to postpone their IPOs and suspending all IPOs for the near future. The affected companies have agreed to pay back all funds that have been raised in anticipation of their IPOs, and it’s unknown how long companies will have to wait before proceeding with their listings.
Top executives from 25 mutual funds, including Chinese Asset Management Co. and E Fund Management Co., have pledged to “actively buy stock funds and hold them for at least a year,” according to Bloomberg. In addition, the China Securities Regulatory Commission has barred corporate executives and directors, as well as investors controlling more than five percent of company holdings, from selling their stakes for six months.
In what has become its largest drop since 1992, the Chinese market has lost 32 percent of its value—trillions of dollars in market value. However, it is still up 79 percent since this time last year. Earlier this year, Shanghai came to lead the world in IPOs, with 78 deals raising $16.6 billion. Hong Kong followed second, with 31 deals at $16 billion. The Shenzhen market comes in fifth, raising $7 billion from 112 deals.