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China's 21 largest brokerage firms announced today they would invest more than $19 billion in the country's stock markets in order to curb its precipitous fall over the last three weeks.
The brokers will spend at least 120 billion yuan ($19.3 billion) on so-called "blue chip" exchange traded funds (ETFs), the Securities Association of China said in a statement after an emergency meeting in Beijing.
The group promised to act "firmly" to stabilise local markets, after a spate of official policy moves to stop the sell-off.
The Shanghai stock market has plummeted by almost 30 percent over the past three weeks. Yesterday the Shanghai Composite Index closed down 5.77 per cent to end at 3,686.92 points.
Experts fear it could turn into a full-brown crash introducing even more uncertainty into global markets as Europe teeters on the edge of a potential exit by Greece from the eurozone.
The $19 billion investment represents 15 per cent of the brokerages' combined net assets.
The firms said they would not sell the stocks they held on July 3 and would continue to buy more as long as the benchmark index remains below 4,500 points.
The move follows an announcement by the market regulator yesterday to limit initial public offerings (IPOs) in an attempt to curb plunging share prices.
IPOs in China disrupt the rest of the market as official restrictions mean almost all of them go up 44 per cent on their first day of dealings -- so investors drain existing holdings to try to secure the near-guaranteed profits.
The volatility is not linked to the ongoing crisis in Europe. Shanghai had swelled by 150 per cent in the last twelve months and experts had expected a sharp correction.
