China Halts IPOs in Peculiar Attempt to Prop Up Stock Market

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The latest from China, where the stock market continues to plummet:

China has decided to suspend new stock sales and establish a market-stabilization fund aimed at fighting off the worst equities selloff in years, as concerns grow among China’s leadership that the stock-market malaise could be spreading to the other parts of the world’s second-largest economy.

…Previous steps including an interest-rate cut by the central bank have failed to impress investors, many of whom have been forced to unwind their leveraged bets as stocks continue to drop.

Chief among the decisions made is to halt new initial public offerings in a bid to preserve liquidity in an increasingly volatile market, the people said. Officials also discussed the setup of a market-stabilization fund.

Another odd move that I don’t entirely understand. Do IPOs reduce market liquidity in any significant way? Put another way: Am I missing something here, or is this just another panicky move by the Chinese authorities that’s unlikely to make things better?

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