Repeated efforts of China's government and central bank to stabilize the markets have failed, at least so far, as Chinese stocks keep plunging.
The Shanghai Composite Index had dropped more than 24% from its June 12 peak as of Thursday’s close, despite an avalanche of stimulative measures by the government.
Over the weekend, the People's Bank of China unveiled a bigger-than-expected monetary easing package, cutting both interest rates and the reserve requirement ratio (RRR) for banks.
The China Securities Regulatory Commission (CSRC) had set up a team
to look at "hints of illegal manipulation across markets", spokesman
Zhang Xiaojun said in comments on the CSRC's official Weibo microblog
late on Thursday.
"Cases that meet legal standards will be
immediately investigated, seriously cracked down upon according to law,
and those suspected of a crime will be resolutely transferred to the
police for investigation," he said.
In the meantime, the China Financial Futures Exchange has suspended 19 accounts in the past month for short-selling, sources told Reuters.
In this environment, the Financial News, a People’s Bank of China-run newspaper, wrote Friday that predatory forces were aggravating the risks for the Chinese markets, in particular Morgan Stanley, as it has withdrawn a previously upbeat forecast for the Shanghai Composite Index after a sharp drop for the benchmark on June 26.
The editorial said Morgan Stanley was suggesting that the Shanghai Composite may have topped out at the beginning of June, and it blamed the U.S. investment bank for either making “a malicious remark carelessly” or bearing “ulterior motives.”
The newspaper suggested that being negative on Chinese equities, those banks sought to disturb the country's economic reforms.
In a similar way, five professors from China’s leading universities released a widely distributed public letter Thursday, suggesting malicious market forces were exploiting weaknesses in China’s financial system for profit. They compared the situation to when investor George Soros and others bet against East Asian currencies during the 1997-98 Asia Financial Crisis.
Professors called on China's authorities to watch the stock transactions of large investors and halve the stamp duty in order to steady the markets and avoid potential social turmoil.
Earlier today, a group of the first 28 companies to be listed on the
more speculative Shenzhen Enterprise Board issued a joint statement, pledging they would use all possible measures, including stock
buybacks and other share purchases, to buoy their stock prices and
shield the stability of that market.
This happened in the wake of a joint pledge by a similar group of 24 firms from the eastern province of Zhejiang who vowed to protect the thrift of capital markets by buying more of their own shares.
