China stocks slump again, despite government efforts
AFP
AFP, SHANGHAI: Chinese shares sank yesterday, a day after Shanghais steepest one-day slide in eight years, defying renewed government vows of support that analysts warned were not enough to soothe nervous investors.
The fresh losses, in a volatile session, came despite an unprecedented effort by the government of the worlds second largest economy to shore up prices following a month-long rout.
The recent turmoil followed a stock boom encouraged by the authorities, and their willingness to intervene in the market has raised questions about their commitment to economic reforms.
The Shanghai Composite Index fell 1.68 per cent, or 62.56 points, to 3,663.00 on turnover of 685.1 billion yuan ($112.0 billion) after falling as much as 5.0 per cent and rising up to 0.93 per cent during the day.
The Shenzhen Composite Index, which tracks stocks on Chinas second exchange, ended down 2.24 per cent, or 48.39 points, at 2,111.70 on turnover of 618.8 billion yuan.
Some of Chinas legions of small investorswho dominate the market, unlike most exchanges worldwide, where institutions are the largest stockholderssay they are heading for the exits. I sold 90 per cent of my stocks since I saw several reports saying that the market is due for a correction, said Ling Lihui, a manager at a market research company, who sold last week.
Mondays 8.48 per cent fall in Shanghai was the biggest drop since February 27, 2007 and sent tremors through global bourses. After the market closed on Tuesday, the securities regulator warned it would investigate Mondays abnormal fall, blaming it in a statement on concentrated selling of shares. It gave no further details.
Although Chinese equity markets are relatively closed to outside investors, there are worries about the health of the underlying economy, which is a key driver of global growth.
On Wall Street the Dow fell 0.73 per cent on Monday while London, Paris and Frankfurt also lost ground on China worries.
Asian markets mostly fell again Tuesday but Hong Kong closed up 0.62 per cent.
After Mondays collapse the China Securities Regulatory Commission said it would continue to stabilise prices.
The state-backed China Securities Finance Corp., tasked with supporting the market, would increase its shareholdings, the commission said in a statement. Infrastructure-linked stocks fell in Shanghai. Longjian Road and Bridge plunged by its 10 per cent daily limit to 6.77 yuan while Offshore Oil Engineering slumped 7.94 per cent to 11.25 yuan.
But banking shares rose on expectations they are the target of government buying. In Shanghai, China Minsheng Banking rose 4.11 per cent to 9.11 yuan, China Construction Bank added 3.19 per cent to 6.15 yuan and Shanghai Pudong Development Bank gained 2.21 per cent to 15.24 yuan. Analysts warned that regulators comments might not be enough without concrete action. The governments current intervention was not able to stop the markets slide and only delayed the decline, Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong, told Bloomberg News.
Beijing initially stepped in after the market plunged more than 30 per cent in just under four weeks from mid-June, having risen more than 150 per cent in the previous 12 months.
Early efforts failed to change sentiment, until the government banned shareholders with more than five per cent stakes from selling stock and launched a police crackdown on short-selling.
