Chinese government justifies its stock market intervention aimed at preventing indices from further falling. According to the announcement of officials from the Chinese Ministry of Finance, the country’s authorities have rights to implement any stabilization measures. This experience was learned from the US and UK, which consider that markets’ stability to be the key criterion of their work.
Since July 12, the Shanghai Composite Index slid by 30% and then added 15%. The SZSE Component Index, an index of 40 stocks that are traded at the Shenzhen Stock Exchange, dropped by 40%.
The Chinese government decided to take unprecedented measures and allocated 3 billion yuan or 483 billion US dollars. The stock market decline has already reduced the capitalization by 3 billion US dollars. Moreover, investors holding stakes of more than 5% in companies were banned from selling shares in the next six months.
Changes of the recent days may be explained by the authorities’ intervention, information on which was revealed on Friday.
