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Drastic correction not good for market, says commission

A drastic correction goes against the healthy and stable functioning of the stock markets, said a spokesman of the China Securities Regulatory Commission (CSRC), as A-shares suffered their worst two-week since 1996.

The country's largest four exchange-traded funds that track blue-chips reported a total net inflow of about 10 billion yuan on Monday, the same day the above remarks were made via the securities watchdog's microblog account.

The net inflow at such scale was rare, [Company Registration in USA]which showed "mysterious" capital had moved to buy up at the market low, said China Fund News, a financial newspaper owned by People's Daily, raising possibility of the purchase made by Central Huijin Investment Ltd, the shareholding entity behind the country's major State-owned financial enterprises.

"Investors had accumulated a lot of gains in earlier times, therefore the recent decline could be seen as adjustments after the rapid surge, which is the result of market mechanism," said Zhang Xiaojun, spokesman of the CSRC.

"Despite the loss, net-buy orders increased compared with that of Friday and the transaction volume have stayed at a relatively high level," said Zhanag.

The benchmark Shanghai Composite Index fell 3.3 percent to close at 4,053.03 on Monday, extending the loss from its peak on June 12 to more than 20 percent, while the Shenzhen Component Index slumped 5.8 percent to 13,566.27.

The average turnover at the two bourses over the last two weeks surpassed 1.2 trillion yuan, with another 255,000 new accounts opening on an average day to chip into the markets, according to the data from the CSRC.

Zhang eased the concerns over leveraged investors forced to unwind their position in the written reply on Monday. "The margin financing and short selling activities have passed tests over the last two weeks and run normally. The risk is manageable."

The fundamentals remain unchanged that reform dividends will continue to unleash under an upward economic trend, and the market liquidity is abundant, said Zhang, adding that the CSRC will accelerate the opening up of Chinese capital market and encourage long-term investors, domestic and overseas.

BlackRock Inc, [Offshore Company Incorporation] the world's largest asset manager, plans to start using the Shanghai-Hong Kong trade link, reported Bloomberg.

The firm's Hong Kong-domiciled China A-Shares Fund plans to invest part of an initial $60 million via the stock connect after a round of successful tests, said Marc Desmidt, BlackRock's head of strategic product management for Asia Pacific to Bloomberg.

The decision to use the link isn't related to the latest market decline, Desmidt said. The money manager already has about $1.5 billion of quota to buy mainland shares through separate programs for qualified foreign institutions.

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