Chinese stocks jumped on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilize the world’s second-biggest economy. In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.
Investors, who had ignored official measures to prop up the market as equity indexes slid around 12 percent last week, finally reacted, with the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen jumping 4 percent, while the Shanghai Composite Index .SSEC gained 3 percent. Blue chips, the explicit target of the stabilization fund, outperformed stocks on the small-cap ChiNext indexes.
The rapid decline of China’s previously booming stock market, which by the end of last week had fallen around 30 percent from a mid-June peak, had become a major headache for President Xi Jinping and China’s top leaders, who were already struggling to avert a sharper economic slowdown. In response, China has orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.
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