China launches stock rescue fund
(Reuters)
Updated: 2005-09-29 09:14

China has launched a stock rescue fund, which will focus on compensating investors and helping brokerages that run into problems, one of a raft of measures designed to buoy the nation's stock markets.

Money for the fund will come from a small portion of stock trading commissions from the Shanghai and Shenzhen stock exchanges, as well as brokerages, according to rules governing the use of the fund published in official newspapers on Thursday.

Regulators set up a company to manage the fund in early September, overseen by five government agencies, including the China Securities Regulatory Commission, the Ministry of Finance and the central People's Bank of China.

"The launch of the fund will allow us to quickly compensate investors, in particular small investors, when brokerages face closure or bankruptcy," an official from the company said in a statement.

The rules did not say the fund could be used to rescue the stock market, but they did say the money could be used "in other ways approved by the State Council" -- China's cabinet.

Analysts have reckoned the fund could amass up to 50 billion yuan ($6.2 billion) -- 1.5 percent of the market's $430 billion capitalisation -- by the end of the year.

China's key stock index has fallen 11 percent so far this year and is hovering at multi-year lows. It dived 15 percent in 2004.