BEIJING (REUTERS) - China has decided to suspend new initial public offerings (IPOs) and establish a market stabilisation fund aimed at fighting off the worst market sell-off in years, as concerns grow among the country's leadership that the malaise could be spreading to other parts of the economy, the Wall Street Journal reported yesterday, citing unidentified sources.
The decision was made at a meeting held earlier in the day involving officials from the Cabinet, the central bank, the securities regulator and other financial agencies, the report said.
It is not known how long the ban will last but the move will affect billions of dollars of new stock sales in the pipeline. Already, 28 Chinese companies planning to list said yesterday that they would suspend their IPOs.
Brokerage firms in China have also come together to set up a stock-market fund in the latest effort to stem the biggest three- week drop in the key Shanghai Composite Index since 1992.
The 21 brokers led by Citic Securities will invest the equivalent of 15 per cent of their net assets as of the end of last month, or no less than 120 billion yuan (S$26 billion) in total, the Securities Association of China said in a statement on its website yesterday.
The fund will invest in blue- chip exchange-traded funds, it said. The brokers also pledged not to reduce any proprietary investments in the equity market as long as the Shanghai Composite Index stays below 4,500, it added.
The moves come after measures to shore up equities failed to stop margin traders from unwinding positions at a record pace, having erased over US$2.8 trillion (S$3.8 trillion) of value in three weeks.
Previous steps, including an interest-rate cut by the central bank, have failed to impress investors, many of whom have been forced to unwind their leveraged bets as stocks continued to drop.