China spends billions to prevent stock market crash

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The brokerage firms indicated they will keep buying as long as the Shanghai Composite Index is below 4,500. The index currently stands at just above 3,685.

(CNN) — China's stock market is in trouble. It's down over 20% since mid-June.

But Chinese stock brokers are trying to tell scared investors: Stop selling. Help is on the way.

On Saturday (July 5 PHT), China's 21 largest brokerage firms said they would spend a whopping 120 billion yuan (about $19.3 billion) to try to stabilize the market, according to Chinese state media. The firms will actually buy stock funds themselves.

The goal is to show regular mom and pop investors that the big players still think buying stocks is a good idea. It's a similar strategy to companies buying back their stock when they think it's undervalued.

Big stock slide: The Shanghai Composite -- the world's third largest stock exchange if you add up the value of its companies -- has lost 24% since June 12, putting it officially in bear market territory. The bears are growling even louder on the smaller Shenzhen Composite, down roughly 30% in the same period.

The brokerage firms argue that after the steep drop in many Chinese stocks, the shares now "offer a precious investment opportunity."

The firms indicated they will keep buying as long as the Shanghai Composite Index is below 4,500. The index currently stands at just above 3,685.

Trouble ahead? China's stock market has been on a wild ride in recent months. It shot way up and many Chinese investors jumped in, hoping to get rich quickly. While the stock market has tumbled in recent days, the Shanghai Composite is still up 14% this year -- a better gain than America's stock market.

Still, there are warning signs that more pain may be coming. According to Oxford Economics, shares may have to fall another 35% or so to bring them into line with long-term averages.

This story was first posted on CNN.com, "China spends billions to prevent stock market crash"