China regulator urges mutual funds to support struggling listed firms-media

SHANGHAI (Reuters) – China’s securities regulator has urged mutual fund houses to support cash-strapped listed firms, and help mitigate risks associated with pledged share financing, the official China Securities Journal reported on Tuesday.

The China Securities Regulatory Commission (CSRC) has recently issued a notice to fund managers, exhorting them to use their own capital, or raise public money, to provide liquidity support to listed firms with prospects, the newspaper said.

The move comes amid a wider relaxation in Chinese investment rules in a bid by regulators to stem the stock market slide and ease margin call pressure on listed companies, many of which face the rising risk of ownership changes and business disruptions.

The article said on Tuesday said such mutual fund investment should be financial in nature, and should not seek corporate control. CSRC will relax limits around the scope of investment, risk management and other rules for institutions that help ease liquidity pressure at struggling firms.

About $620 billion worth of Chinese shares, or 10 percent of stock market capitalization, has been used as collateral against loans.

Eleven Chinese brokerages have committed 25.5 billion yuan ($3.70 billion) to an asset management scheme that aims to eventually channel over 100 billion yuan into cash-strapped listed firms plagued by pledged share woes.

Local governments and insurers have also joined the rescue campaign, unveiling plans for a slew of funds aimed at aiding struggling listed firms.

Guoyuan Securities plans to raise 6 billion yuan in a “relief fund” in partnerships with insurers and state-owned firms, the official Securities Times reported on Tuesday.

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