Beijing: China has vowed to stabilize its stock markets after the share prices on the Shanghai Stock Exchange plunged on Monday, the largest single-day drop since June 2007.
China Securities Regulatory Commission (CSRC) will continue to take measures to stabilize the stock markets, Global Times cited analysts as saying. The analysts added that fears that the government may halt support measures may have triggered the drop.
The CSRC also said that it will look into the possibility of malicious short-selling activities, and welcome public support in identifying alleged short sellers and “severely” punish offenders, the media report said.
The benchmark Shanghai Composite Index plunged 345.35 points to close at 3,725.56 points on Monday, while the Shenzhen Component Index fell by 1,025.46 points, or 7.59 percent, to 12,493.05 points.
Li Daxiao, chief economist at Shenzhen-based Yingda Securities, was quoted as saying that the weak economic data is only a minor reason for souring market sentiment.
“The more important factor is that some stocks on the two bourses are still overvalued, leading to the market correction,” Li told the Global Times on Monday.
Authorities announced measures to arrest the market slump that began on June 12. It includes a relaxation on margin trading rules – using borrowed money to invest in the market – a ban on major shareholders from selling within six months and a crackdown on “malicious” short selling.
“If the market remains turbulent, the government may roll out additional measures to back the stock market,” Liu Xuezhi, an analyst at the Bank of Communications, told the Global Times.
Chinese police have investigated 380 online lenders and frozen $1.5 billion in assets following an avalanche of scandals in the huge but lightly regulated industry, the government announced Monday.
Beijing allowed a private finance industry to flourish in order to supply credit to entrepreneurs and households that aren’t served by the state-run banking system. But that threatens to become a liability for the ruling Communist Party after bankruptcies and fraud cases prompted protests and complaints of official indifference to small investors.
The police ministry said it launched the investigation because person-to-person, or P2P, lending was increasingly risky and rife with complaints about fraud, mismanagement and waste.
The ministry gave no details of arrests but said more than 100 executives were being sought by investigators and some had fled abroad. It said authorities seized or froze 10 billion yuan ($1.5 billion) but gave no indication how much might be returned to depositors.
Police say some lenders and investment vehicles were brazenly fraudulent, while others collapsed after inexperienced founders failed to manage risk.
Monday’s statement said P2P lenders were investigated for complaints including wasting money, reporting phony investment plans and using illegal tactics to raise money.
Lending through online platforms grew by triple digits annually until 2017 when regulators tightened controls.
Depositors lent 1.9 trillion yuan ($280 billion) last year, but that was down by 50 percent from 2017, according to the Shenzhen Qiancheng Internet Finance Research Institute.
The outstanding loan balance stood at 1.2 trillion yuan ($177 billion) at the end of 2018, down 25 percent from a year earlier, according to Diyi Wangdai, a web site that reports on the industry.
P2P lenders are part of a privately run Chinese finance industry the national bank regulator estimated in 2015 had grown to $1.5 trillion.
The internet has helped financial platforms attract money from financial novices with little knowledge of the risks involved.
Many lend to factories and retailers or invest in restaurants, car washes and other businesses. But inexperience and poor risk control means a downturn in business conditions can bankrupt them.