Despite the Chinese Securities Regulatory Commission’s (CSRC) recent pledge to curb abnormal market fluctuations, Chinese stocks experienced a tumultuous day on Monday. The CSI 1000 Index, consisting of small caps, closed 6.2% lower, reaching a low point of nearly 9% in the day. On the other hand, the blue-chip CSI 300 Index managed to reverse its initial drop of 2.1% and closed 0.6% higher.
In response to the stock selloff that had deepened on Friday, resulting in a 6.7% decline in the CSI 300 for the year, the CSRC released a statement on Sunday emphasizing its commitment to maintaining market stability. However, this statement did not provide specific measures, leading to a continued decline in Chinese stocks early on Monday. This decline primarily affected small caps as the regulator seemed to indicate a heavier focus on supporting larger companies.
Despite these challenges, Chinese technology giant Alibaba managed to weather the storm relatively unscathed, with its shares only falling by 0.1%. However, it has still seen a decline of 6.5% for the year. JD.com’s shares, on the other hand, saw a slight increase of 0.1% but have fallen by 24% over the course of this year. It is worth noting that Alibaba and JD.com’s American depositary receipts were trading higher at the beginning of the week.
In response to potential risks arising from pledged shares, wherein shares are used as collateral for loans, the CSRC also issued a statement on Monday indicating its intention to closely monitor and take measures to prevent such risks. The statement also highlighted the commission’s goal of guiding brokerages and other financial institutions in increasing the flexibility of the liquidation line and facilitating smooth market operations.
While the CSRC’s recent announcements aim to tackle market manipulation, malicious short selling, insider trading, and maintaining stability, investors remain cautious about the lack of specific measures outlined in these statements. As the Chinese stock market continues to experience fluctuations, it is uncertain how effective these measures will be in bringing about lasting stability.