China prepares stock market stabilization fund

According to Bloomberg, China is considering setting up a $278 billion stabilization fund to buy stocks. After previous attempts to restore investor confidence fell short and Premier Li Qiang called for “strong” steps, Chinese authorities are considering a new package of measures to stabilize the slumping stock market, according to sources familiar with the matter, Bloomberg said. Sources who spoke to Bloomberg said they are considering using $278 billion, mostly from overseas accounts of Chinese public institutions, as a stabilization fund to buy Chinese stocks on the Hong Kong exchange. In addition, at least 300 billion yuan of local funds will be set aside to invest in Chinese stocks through China Securities Finance Corp. or Central Huijin Investment Ltd. The sources said authorities are also considering other measures, which could be announced this week if approved. However, the steps under consideration are not final and could change. The assessments come after the CSI 300 index fell to its lowest level in five years this week. Following Bloomberg’s report on the issue, the Hang Seng China Enterprises Index, which trades Chinese stocks, rose nearly 4% at one point this morning. This was the index’s strongest daily rise since Nov. 15. The index had fallen to its lowest levels in 19 years on Monday.