Concept and Role of Stabilization Funds

Xiao Huang: DOORM, could you explain in detail what a stabilization fund is and its role in the stock market?

DOORM: A stabilization fund is established by the government through specific institutions, such as the securities regulatory commission, the Ministry of Finance, or stock exchanges, using legal means. Its main purpose is to stabilize the market by intervening with large-scale funds during significant market fluctuations. When the stock market experiences severe declines, the fund buys stocks to support the market; conversely, when the market overheats, it sells stocks to cool it down. This mechanism is considered an important tool for the government to conduct macroeconomic regulation of the capital market.