China’s securities regulator urged investors to be rational and not to believe “shorting China rumors” after the plunging benchmark index entered into a bear market on Monday.
The slump is a result of previous rapid gains and the market’s own “rules,” China Securities Regulatory Commission spokesman Zhang Xiaojun said in a statement on its official microblog on Monday. Still, a sharp fall isn’t good for market stability or healthy development, Zhang said.
“We will continue to support domestic and foreign capital to invest in the stock market,” Zhang said. “We expect investors to have confidence and independent judgment of the market, and not to believe irresponsible rumors.”
Zhang’s comments are the latest attempt by Chinese regulators to boost sentiment. The benchmark Shanghai Composite Index dropped 3.3 percent to 4,053.03 at the close on Monday, taking declines from its June 12 peak to more than 20 percent. The gauge swung between a loss of 7.6 percent and a gain of 2.5 percent in Monday trading, recording the biggest intraday point move since 1992.
China will introduce a Shenzhen-Hong Kong Stock Link at an “appropriate time,” and will also improve the Qualified Foreign Institutional Investor (QFII), Renminbi QFII, and Shanghai-Hong Kong Stock Link programs, according to Zhang.
Earlier in the day, the Ministry of Finance announced that it will allow the basic endowment pension fund to invest in stock markets. Regulators are also considering suspending initial public offerings to augment stability, people familiar with the matter said on Monday.
China’s liquidity is in general sufficient, and the direction of the country’s improving economy remains unchanged, Zhang said. The regulator will continue to “forcefully” punish insider trading, violations by major company shareholders and market manipulation.
China’s interest-rate cut over the weekend, along with assurances from the securities regulator that risks from margin trading are controllable, failed to ease concern that speculators are unwinding their positions.