The Shanghai Composite Index, which fell 7.4% on Friday, is down 19% from a recent high on fears the market has risen too rapidly on the back of heavy borrowing. “The market may be receiving mixed signals on what exactly the PBOC hopes to achieve with its rate cut“.
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Bloomberg reported that the Shanghai stock market fell by at least 3 percent by the time it closed down today.
The Shanghai Composite index fell by 3.3pc at the close, to 4,053, with the crisis in Greece exacerbating the violent market swings.
However overseas long-only institutional investors have been wary of buying the so-called A-shares as valuations have surged since November when China launched a two-way Stock Connect trading link between the Shanghai and Hong Kong bourses to ease access to mainland stocks.
The firm’s Hong Kong-domiciled China A-Shares Fund plans to invest part of an initial US$60 million via the connect after a round of successful tests, said Marc Desmidt, BlackRock’s head of strategic product management for Asia Pacific.
“Many people said they’re keen to lock in profit, rather than make profit in the second half, because they have made enough in the first half”.
The downturn in China’s stock market is not a very real risk to the global markets, Asian equities specialist Simon Male said Friday.
Analysts say the falls were mainly triggered by new restrictions on margin trading and accelerated by concern stocks were overvalued.
On the positive side, the government’s favorable policy has remained in place with the aim of sustaining the bullish market so as to change the financial market structure, lower corporate funding costs, fund state enterprise reform and offset the impact of the sluggish realty market, although the government hopes to avoid a rally that can not be reined in.
“The whole Shanghai market from a developmental point of view will become more internationalized and more regulated”, said Zhao Xijun, deputy finance school dean at Renmin University of China. Australia’s S&P/ASX 200 index XJO, -2.04% fell 1.4% in early trade, while the Nikkei 225 Stock Average NIK, -1.78% was 2% lower on the news from Greece. The ChiNext gauge of small companies plunged 7.9 per cent, extending losses this month to 24 per cent. Bank of Beijing Co. erased a 3.1 percent gain, falling 1 percent, while Ping An Bank slid 1.5 percent. In an additional move to shore up the economy and reassure investors, the bank also lowered the amount of cash that large banks must keep on reserve by 0.5 percent. In the past two weeks around $1.2 trillion (£600bn) has been wiped off the value of Chinese listed companies since the market reached its peak on June 12.
The doubling in China’s main indexes in the past year coincided with the weakest economic growth in a quarter century.
Friday’s losses came after Morgan Stanley advised clients to refrain from purchasing mainland shares in a report that day, saying the Shanghai Composite’s June 12 high likely marked the top of the rally.
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NEW YORK (AP) – USA stocks are mostly higher in midday trading as negotiators continue to work toward a solution to Greece’s debt problems.
