THE government might limit new share sales and allow investors to borrow money to buy equities in an effort to boost the stock market, according to CITIC Securities Co.

“The government may announce new measures to support the market if it doesn’t stabilize,’’ said Cheng Wei- qing, chief strategist at CITIC Securities, the nation’s largest publicly traded brokerage, in Beijing on Saturday.

The CSI 300 rallied 16 percent last week after the government reduced the stamp duty on stock transactions to encourage trading. The index has still declined 20 percent over the last three months.

Shares slumped after the CSI 300 rose almost sixfold in 2006 and 2007 and stocks traded at an average 52.8 times earnings.

They also fell on concern government steps to curb inflation would hurt corporate profit and new equity sales would overwhelm demand. This year’s decline wiped out US$1.14 trillion in market value.

Margin buying allows investors to pay a percentage of the cost of a stock, with the brokerage financing the rest through a loan.

The government clamped down on unauthorized margin trading in 1997 and 2001, when banks were found to have illegally channeled money into the stock market. (SD-Agencies)