Chinese stocks show biggest loss since 2007
Three out of four are down
CHINESE stocks fell in volatile trading, extending the biggest one-day loss since 2007, as concern grew that unprecedented government intervention may fail to shore up equities.
The Shanghai composite index dropped 1.7 percent to 3 663 points at the close, after sinking as much as 5.1 percent and gaining 1 percent. About three stocks slid for each one that rose.
Energy and technology shares slumped, while brokerages led an advance by financial companies. The gauge tumbled by 8.5 percent on Monday amid concern that a three-week rally, sparked by unprecedented government intervention, is unsustainable.
Investors assured
Chinese traders reduced leveraged stock bets on Monday by the most in two weeks as the stock plunge erased $613 billion (R7.73 trillion) in value. The securities regulator as- sured investors in a statement after the market closed that the government had not withdrawn support for equities.
“Confidence is very weak and the market will probably still seek a lower level of support,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance, which oversees about $3.3bn. “If the market falls to, or approaches the previous low, the government will take further rescue measures.”
Retreated
The Hang Seng China enterprises index dropped 0.5 percent in Hong Kong, while the Hang Seng index climbed 0.6 percent. The CSI 300 index retreated 0.2 percent, paring a loss of as much as 5 percent.
Trading volumes were 3.8 percent below the 30-day average yesterday. Data showed the number of new stock investors fell 26 percent to 391 500 during last week, down from 1.5 million in the first week of last month.
Monday’s retreat shattered the sense of calm that had fallen over mainland markets last week and raised questions over the viability of government efforts to prop up share prices as the economy slows.
The International Monetary Fund has urged China to eventually unwind its support measures, according to a person familiar with the matter.
China Securities Finance, a state-backed agency that provides margin financing and liquidity, had not exited the stock market, China Securities Regulatory Commission (CSRC) spokesman Zhang Xiaojun said in a statement after the close of trading on Monday. The CSRC said yesterday that it was investigating the previous day’s stocks sell-off.
Rebounded
The Shanghai gauge had rebounded 16 percent from its July 8 low to Friday as officials went to extreme lengths to halt a rout that erased $4 trillion from the nation’s equities.
Officials allowed more than 1 400 companies to halt trading, banned major shareholders from selling stakes and armed a state-run financing vehicle with more than $480bn to support the market.
“I do think they will reduce intervention, which is what the market is afraid of these days,” Steve Yang, a strategist at UBS Group, said in Shanghai on Monday.
“The process will be very long. They do not need to rush to sell their positions in the short term.”
Gauges of energy, industrial and technology shares in the CSI 300 dropped more than 3 percent for the steepest losses among 10 industry groups.
China Railway Group slumped 8 percent for a threeday retreat of 20 percent.
The outstanding balance of loans backed by share purchases fell by 21.4 billion yuan ($3.4 billion) to 919.4 billion yuan on the Shanghai exchange on Monday.
Margin financing may end this year at less than half the record high achieved last month as deleveraging continues.
Confidence is very weak and the market will probably still seek a lower level of support.