Bears tighten their grip on stock mar­kets as re­cov­ery chances take a hit

China Daily (Canada) - - FRONT PAGE - By LI XIANG lix­i­ang@chi­

Fear seems to be re­turn­ing to the Chi­nese eq­uity mar­ket af­ter another sharp fall in stock in­dexes on Wed­nes­day, dim­ming in­vestors’ hope for a sus­tained re­cov­ery from the re­cent mar­ket rout.

An­a­lysts warned that it may be a long time be­fore the mar­ket re­bounds to the pre­vi­ous high, as the illegal lever­aged funds have been wiped out and in­vestors with cash are adopt­ing a wait-and-see ap­proach.

The bench­mark Shang­hai Com­pos­ite In­dex on Wed­nes­day sank by 3.03 per­cent to close at 3,805.7 points, de­spite the surge in blue-chip energy and fi­nan­cial stocks. The startup in­dex ChiNext in Shen­zhen suf­fered an even heav­ier loss of 4.99 per­cent.

Nearly 1,000 stocks in the Shang­hai and Shen­zhen bourses tum­bled by the 10 per­cent fluc­tu­a­tion limit, in­di­cat­ing shaky in­vestor sen­ti­ment de­spite the gov­ern­ment rolling out a se­ries of mea­sures to prop up the fall­ing mar­ket.

“The gov­ern­ment can use pol­icy mea­sures to urge Sta­te­owned funds and com­pa­nies to buy shares. But a lot of cash is still ly­ing in the bank ac­counts of in­vestors who ap­pear to be hes­i­tant at this mo­ment,” said Lu Ting, chief economist atHu­atai Se­cu­ri­ties Co Ltd.

The stock mar­ket has been on a roller-coaster ride with the bench­mark in­dex wit­ness­ing a nearly 30 per­cent plunge that erased about $4 tril­lion of mar­ket value af­ter a year-long rally of 150 per­cent which peaked in mid-June.

Late onWed­nes­day, the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion said it is closely work­ing with the po­lice and ma­jor In­ter­net por­tals to crack down on online ru­mor­mon­ger­ing and spread­ing of false in­for­ma­tion, that could af­fect the stock mar­ket.

The mar­ket had not been fu­eled so much by im­proved eco­nomic fun­da­men­tals and cor­po­rate prof­itabil­ity as by am­ple liq­uid­ity and in­vestors’ an­tic­i­pa­tion of eco­nomic re­forms, said an­a­lysts.

But econ­o­mists have warned that the re­cent con­tin­gency mea­sures, in­clud­ing the halt in ini­tial public of­fer­ings and curbs on share sales by ma­jor share­hold­ers, may run the risk of erod­ing in­vestors’ con­fi­dence in the gov­ern­ment ef­forts to push cap­i­tal mar­ket re­form and open­ing up.

“The key is to re­store mar­ket con­fi­dence and con­vince in­vestors that the re­forms will con­tinue,” Lu said, adding that the gov­ern­ment should re­sume its role as a ref­eree and give way to mar­ket func­tions once the sys­temic fi­nan­cial risks are con­tained.

On Wed­nes­day, for­eign in­vestors con­tin­ued to be net sellers of Chi­nese A shares through the Shang­hai-Hong Kong Stock Con­nect pro­gram for an eighth con­sec­u­tive day. Off­shore in­vestors have re­duced to­tal hold­ings by $7.1 bil­lion through the trad­ing link since July 6, the Fi­nan­cial Times re­ported.

There are ris­ing con­cerns among over­seas in­vestors that the gov­ern­ment in­ter­ven­tion to stem the slide may af­fect the in­ter­na­tional ac­ces­si­bil­ity of the A-share mar­ket and im­pede the open­ing-up process of China’s cap­i­tal mar­ket.

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