Asian Markets: New Steps To Calm The Storm

Asian stock markets are facing a make-or-break week following emergency measures unveiled at the weekend designed to prevent a full-blown stock market crash.

The mainland Chinese markets have been among the strongest in the world but have plunged almost 30% in the past three weeks.

In response, officials in China rolled out an unprecedented series of steps on Sunday to try to ensure the world’s second largest economy is not impacted by the slump.

But the effort was somewhat undermined by the outcome of the Greek referendum, which negatively impacted on markets around the world.

In an extraordinary series of moves, China’s state-backed finance company announced it would support brokerages and fund managers in buying massive amounts of stocks in an attempt to counteract panicky investors who borrowed heavily to speculate and are now selling en masse.

The finance company will, in turn, be supported by a direct line of liquidity from the Chinese central bank.

The government has also orchestrated a halt to the issuing of new shares, with the China Securities Regulatory Commission (CRSC) stating that there would be no initial public offerings, or IPOs, in “the near future”.

It is hoped the move will mean funds which would usually be directed towards acquiring new shares will be directed elsewhere in the market, boosting prices and sentiment.

But the impact of the emergency measures was not felt everywhere.

Shanghai soared 7.82% at the open before sinking rapidly again - losing almost 1% briefly in the afternoon. But it ended the day 2.41% higher, adding 89.00 points, to 3,775.91.

Hong Kong, however, plunged 3.18%, or 827.83 points, to 25236.28 - wiping out a 0.70% rise in the opening minutes that came on the coat-tails of the mainland gains.

While the volatility can be partly attributed to the heightened possibility of a Greek exit from the European Union following Sunday’s referendum, it remains a make-or-break week for Asia, particularly as previous “stability measures” in the Chinese market have done little to calm investors.