10/10/2011 05:50 EDT | Updated 12/10/2011 05:12 EST

Chinese investment arm buys bank shares, aiming to support market

SHANGHAI - A Chinese government investment arm bought shares in the country's four biggest state banks on Monday, moving to support the ailing stock market.

The announcement by Central Huijin Investment Ltd., an arm of the sovereign wealth fund China Investment Corp., came after the benchmark Shanghai Composite Index closed at its lowest level in more than two years, losing 0.6 per cent to 2,344.79.

Share prices have languished despite China's still robust growth, weighed down by worries over Europe and tightening liquidity.

The market dropped Monday following reports that housing prices fell in September, prompting a sell-off of property stocks. Poly Real Estate Group lost 3.5 per cent and China Vanke, the industry leader, shed 3.3 per cent.

Central Huijin is the major shareholder in China's big state-run banks. The company said in a brief announcement on its website that it bought shares in the Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank and that it would continue its market-support operations. It gave no details about the amount of shares purchased.

The central bank has ordered China's banks to hold record levels of reserves as it has sought to sponge excess liquidity out of the economy and counter inflation.

Monday's close was the Shanghai benchmark's lowest since April 2009. The index has dropped more than 16 per cent so far this year.

The banks' shares showed modest gains. ICBC rose 0.3 per cent; Agricultural Bank was up 0.4 per cent; Bank of China rose 0.7 per cent and China Construction Bank added 0.2 per cent.