Despite Beijing's assurance to crack down on abnormal market fluctuations, Chinese stocks had a turbulent day on Monday.
CSI 1000 Index Plunges, CSI 300 Index Recovers
The CSI 1000 Index, which represents small-cap stocks, closed 6.2% lower, with a point in the day seeing a 9% decline. On the other hand, the blue-chip CSI 300 Index initially dropped by 2.1% but recovered to close 0.6% higher.
Efforts to Maintain Market Stability
The Chinese Securities Regulatory Commission (CSRC) released a statement on Sunday, affirming its commitment to uphold market stability. However, despite their pledge, Friday's stock sell-off deepened the decline of the CSI 300 Index in 2024, now standing at 6.7% down. Meanwhile, Hong Kong's Hang Seng Index also suffered, falling by 0.2% and dropping 9% for the year.
Strategies to Support Listed Companies and Combat Market Manipulation
In response to the unstable market conditions, the CSRC expressed intentions to provide increased support for "high-quality listed companies." They also announced measures to delist companies and enhance the quality of listed entities while cracking down on market manipulation, malicious short selling, and insider trading.
Market Reaction and Concerns
However, the lack of specific measures in the CSRC's statement caused an early decline in Chinese stocks. Small-cap stocks were particularly affected as the regulator's focus appeared to be more concentrated on larger companies. Surprisingly, Chinese technology giant Alibaba saw only a minor decrease of 0.1% in its shares. Nevertheless, it remains 6.5% down in 2024. Similarly, JD.com experienced a slight increase of 0.1%, but its shares remain 24% lower for the year. Notably, Alibaba and JD.com's American depositary receipts showed higher trading early Monday.
Monitoring Pledged Shares as Collateral
Furthermore, the CSRC issued another statement on Monday, emphasizing its commitment to closely monitor and prevent risks associated with pledged shares used as collateral for loans. It aims to guide brokerages and other financial institutions in increasing the flexibility of the liquidation line to ensure the smooth operation of the market.