China Said to Intervene in Stocks After $590 Billion Selloff

China moved to support its sinking stock market as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter.

Government funds purchased local stocks on Tuesday after a 7 percent tumble in the CSI 300 Index on Monday triggered a market-wide trading halt, said the people, who asked not to be identified because the buying wasn’t publicly disclosed.

 The China Securities  Regulatory Commission asked bourses verbally to tell listed companies that the six-month sales ban on major stockholders will remain valid beyond Jan. 8, the people said.

Chinese policy makers, who took unprecedented measures to prop up stocks during a summer crash, are stepping in once again to combat a rout that erased $590 billion of value in the worst-ever start to a year for the nation’s equity market. While the intervention may ease some selling pressure, it also undermines authorities’ pledge to give markets more sway in the world’s second-largest economy.

“The market has got some help from state funds and that will support shares in the short term,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “However, in the long run, the market will need its own strength to hold up. It can’t always rely on the national team.”

China’s CSI 300 index rose 0.3 percent at the close, after earlier falling more than 2 percent. The plunge on Monday triggered the nation’s circuit breakers on their first day in effect, dealing a blow to regulatory efforts to calm one of the world’s most volatile bourses. 

Authorities are trying to prevent market turmoil from eroding confidence in an economy set to grow at its weakest annual pace since 1990.

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