Chinese Government Asks Brokers How To Boost Stock Prices

China's markets regulator is asking securities firms how to boost stock prices, stoking concerns that Beijing is desperate to restore investor confidence, Bloomberg reports, citing people familiar with the matter.

Last week, the China Securities Regulatory Commission held a meeting with several brokerage houses to solicit feedback. Among the measures proposed by the brokers was a possible cut in the stamp duty on stocks trading, as well as a slowdown in IPO traffic to help boost liquidity, the people said.

The CSRC gave no indications of how they plan to boost the market, though the strategy session with brokers suggests that Chinese officials are highly motivated to carry out an earlier pledge by the Politburo to supercharge the nation's $10 trillion stock market and boost investor confidence. Raising the prices of stocks, where quite a bit of household savings is tied up, would help Beijing shore up funding for the corporate sector.

Participating in last week's consultation was a rare meet-up between the CSRC and global funds, where officials including Vice Chairman Fang Xinghai attempted to calm concerns among foreign investors over investing in China.

Chinese stocks have been weighed down by the nation’s slowing economy for much of this year, underperforming their emerging market peers at one point by the widest margin since at least 1999.

The CSI financials subgauge soared 4.6% on Friday, extending gains earlier this week amid market chatter of a stamp duty cut. Hithink Royalflush Information Network Co. surged 17% and China Galaxy Securities Co. jumped by the 10% daily limit.

The gains helped lift the CSI 300 Index by 2.3%. The benchmark gauge recorded the best weekly performance since November. Overseas investors net purchased 16 billion yuan ($2.3 billion) of mainland shares on Friday, taking the week’s inflows to the largest since January. -Bloomberg

"The speculation about cutting stamp duty has helped lift market sentiment today, as the move would be following the vows to boost financial markets mentioned during the Politburo" meeting, said Steven Leung, executive director at UOB-Kay Hian Hong Kong.