Yesterday, after listing the several bad days in a row we have had on the local stock markets, I suggested that we would soon be testing 2000 again.  It happened sooner than I expected.  Today the market had another awful day, with the SSE Composite losing 3.0% to close the day at 2013, although at its low late in the morning the market actually traded well below 2000, to touch 1963.

Once again the regulators have responded by trying to force the market up.  Here is what the South China Morning Post says about it:

The China Securities Regulatory Commission has temporarily stopped reviewing applications for initial public offerings, sources said, a sign that Beijing is serious about bolstering the mainland's embattled stock market.  The initial public offerings review committee of the CSRC had stopped processing applications between September 16 and the end of this month and the suspension was likely to be prolonged, the sources said.

The sources, who work at brokerages of investment banking units, said the CSRC did not officially inform them of the suspension.  However, they said the review process had been frozen as the regulator hoped to curb equity supply to the weak market.

I hate to repeat myself so often, but although preventing IPOs may indicate how serious Beijing is about the stock market decline, it is not going to have any real impact beyond further undermining the government’s credibility in bolstering the market.  After trying and failing so many times, every new attempt is likely to be taken less seriously by investors.  It would be better to hold back on administrative attempts to support the market and to wait until we really need a confidence booster – something which I suspect is going to happen soon enough.

This may be a smaller point, because I suspect there weren’t going to be many IPOs, anyway, but I wonder if restricting the ability of companies to raise equity (and last week’s new rules allowing companies to issue bonds and use the proceeds to repurchase stock) is a good idea.