La Central Bank of China intends to increase the liquidity available to the country's credit institutions cutting by half a percentage point the amount of stocks which the banks themselves are obliged to keep as a guarantee for creditors. The Wall Street Journal wrote it, specifying that the measure should be implemented between the end of August and the beginning of September and could free up up to 678 billion yuan, a sum equal to 106 billion dollars.
Furthermore, yesterday, the Beijing authorities authorized Chinese pension funds to buy shares on the Shanghai and Shenzhen stock exchanges. They will be able to invest up to 30% of their assets in equities, equity funds and balanced funds. According to what was announced by the Ministry of Social Security at the end of 2014, pension funds had assets under management equal to 3.500 billion yuan (over 550 billion dollars) and represented about 90% of the resources allocated to the country's pensions.
Under the new provisions, up to 600 billion yuan (almost 100 billion dollars) can be invested in the Chinese stock market. The ministry spokesman indicated that over 2 trillion yuan could be used by pension funds for investments and "potentially 600 billion yuan could be allocated to the stock market". Until yesterday, pension funds could only use resources in bank deposits or purchase government bonds.
Meanwhile the bag of Shanghai, after losing 12% last week in the wake of the triple devaluation of the yuan and the latest macro data disappointingclosed the last session with a drop of 8,48%, to 3.210 points, a level far from the 3.700 points which appear to be the threshold on which Beijing intends to stabilize the market. The other Chinese Stock Exchange is also very bad: Shenzhen at the end of the day it left 7,73% on the ground.
The contagion effect extends to all of Asia but also to the rest of the world. Australian stocks finished down 4,09% with mining stocks under pressure and plunged higher than 10%. Tokyo leaves more than 4,50% on the ground with banking stocks among the most penalized with declines over periods to 8%. The Jakarta price list also slipped by more than 4%. Among the worst was the Manila stock exchange, which closed with a crash of 7,20%, while the Kuala Lampur and Seoul lists limited the damage, closing with falls of just over 2%.
