China’s benchmark stock index fell to a three-month low on concern a raft of measures to stabilize equities is failing to stop the bear-market rout as traders unwind margin bets at a record pace.
The Shanghai Composite Index slid 3.6 percent to 3,592.35 at 1:04 p.m., after plunging as much as 8.2 percent, the most since 2007. Power, health-care and consumer companies led declines, as only 46 stocks among the 1,106 that trade in Shanghai rose. PetroChina Co. and Industrial & Commercial Bank of China Ltd., the two biggest stocks, lost more than 2 percent.
The latest attempts to stem declines, which include a wave of Chinese companies halting trading in their shares and regulators unveiling measures to prop up the value of small-cap stocks, have so far failed to convince investors that valuations are cheap enough after a 28 percent drop in the Shanghai Composite from this year’s high on June 12. The measures follow stock purchases by state-directed funds and interest-rate cuts by the central bank in recent weeks.
“Greed and fear,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “If you hadn’t been greedy you have nothing to fear now. We are heading to 2,500.”
At least 1,301 companies have halted trading on mainland Chinese exchanges, locking up $2.6 trillion of shares, or about 40 percent of China’s market capitalization. The China Financial Futures Exchange raised margin requirements for sell orders on CSI 500 index futures, while the central bank will provide “ample liquidity” to the stock market. China Securities Finance Corp. said it will buy more shares of small- and mid-cap companies. The government also ordered state-owned firms not to cut holdings in their listed companies.
China’s equities rout was reverberating around the world, with stock markets from Japan to South Korea dropping, copper sliding to a six-year low in Shanghai and oil futures extending losses to 8.5 percent over the past three days in New York. The offshore yuan traded in Hong Kong weakened to a three-month low.
Full article: China’s Stocks Plunge as State Intervention Fails to Stop Rout (BloombergBusiness)