China Regulator Says Steps to Stabilize Stock Market Temporary

China’s measures to stabilize stocks amid a $3.5 trillion rout are temporary, a spokesman for the market regulator said.

Steps taken by the government, such as a suspension of initial public offerings and a ban on share sales by major shareholders, won’t affect the nation’s market-oriented reforms, China Securities Regulatory Commission spokesman Zhang Xiaojun said at a weekly briefing on Friday. While necessary, the government action was temporary, Zhang said.

The government has taken unprecedented measures to stop the stock rout, arming a state-run financing agency with more than $480 billion to bolster the market and allowing hundreds of companies to suspend share trading. The Shanghai stock gauge posted the biggest loss among 93 global benchmark gauges tracked by Bloomberg in July despite the government measures, as margin traders cashed out and new equity-account openings tumbled.

“In the short term, this is going to have a negative impact,” said Li Bo, chief investment adviser at Guangfa Securities Co.’s Shanghai branch. “The worst crisis is over, but the market confidence is not back.”

The number of new stock investors fell to the lowest since May in the week ended July 24.

“These comments are not a surprise,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “It is unlikely that institutional investors are really surprised by those comments. Timing is going to be very important as, for instance, the resumption of IPOs will need to be done likely gradually.”

The International Monetary Fund told the Chinese government that while interventions in general are appropriate to prevent major disorder, prices should be allowed to settle through market forces, according to a person familiar with the matter.

The CSRC will also tighten punishment of listed companies on their information disclosure violations, Zhang said.

He said the regulator didn’t directly contact Chinese brokerages in Hong Kong for a meeting with their executives in Beijing and Guangzhou. China has asked brokerages in Hong Kong and Singapore for stock trading records, Reuters reported earlier, citing people with direct knowledge of the matter.

— With assistance by Xiaoqing Pi, and Tian Chen

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