CHINA is suspending initial public offerings (IPOs), creating a market stabilization fund and telling investors not to panic in an effort to shore up its stock market, which has had the largest three-week drop since 1992.

    According to company filings to the exchanges Saturday evening, 10 companies will suspend IPOs on the Shanghai Stock Exchange and 18 will do the same at the Shenzhen Stock Exchange.

    The move was ordered at a meeting of the State Council and will be enforced by the China Securities Regulatory Commission, the financial magazine Caijing reported Saturday, without saying how it obtained the information or how long the planned freeze would last

    Funds will be returned to investors today for the new offerings that had already started the subscription process, the companies said in filings to the exchanges.

    Halting IPOs may stem the diversion of funds away from current listings. The move came hours after major Chinese brokerage firms pledged billions of dollars to form a stock market rescue fund.

    The People’s Daily urged investors to stay calm. Moves to stabilize the market take time to transmit, the paper said on Weibo, China’s Twitter-like microblogging site.

    The Shanghai Composite Index fell 5.8 percent Friday to 3,686.92, bringing the decline since its June 12 peak to 29 percent. More than US$2.8 trillion of value has been erased from the Chinese stock market during that time.

    The Securities Association of China said Saturday in a statement on its website that a group of 21 brokerage firms led by Citic Securities Co. will invest the equivalent of 15 percent of their net assets as of the end of June, or no less than 120 billion yuan (US$19.3 billion) in total, to set up a stock-market fund.

    The fund will invest in exchange-traded funds of highly capitalized stocks, it said. The funds should be available by 11 a.m. today, Caijing said in a separate report.

    In another development, top executives from 25 Chinese mutual funds, including China Asset Management Co. and E Fund Management Co., promised to “actively” buy stock funds and hold them for at least one year, according to a statement on Asset Management Association of China’s official website.

    The brokers pledged not to reduce any proprietary investments in the equity market as long as the Shanghai Composite Index stays below 4,500, the association said. Listed brokers will actively buy back outstanding shares, while encouraging their parent companies to increase holdings, according to the statement.

    The economic fundamentals that had justified the stock market’s rally before the rout hadn’t changed, the brokers’ statement said. “It is therefore our duty to unite in stabilizing this market,” the group said.(SD-Agencies)

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