The municipal government of Shenzhen plans to use tens of billions of yuan to provide liquidity support to listed firms and ease pressure of forced liquidations amid a downturn, Reuters reports citing the Shanghai Securities News.
Under the plan, the city that hosts China’s second-largest stock exchange will provide liquidity via loans and equity investment in select companies, it said, citing unidentified people familiar with the plan.
The Shenzhen Composite Index .SZSC has fallen 32 percent since the end of last year, including a 10 percent drop so far in October. That has put shareholders who have put up shares as collateral for loans at risk of being forced to sell, which could further dent share prices.
The liquidity support in Shenzhen would be carried out by Shenzhen government-owned investment platforms, the article said.
The report said there are 281 listed companies in Shenzhen, of which 198, or 70 percent, had outstanding equity pledges as of Aug. 20.