The stocks had more than doubled during the seven-month period from November to June, on the back of sustained retail investment.
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SHARES in big state companies soared Monday after promises of government action to halt a slide in Chinese stock prices but many others sank as jittery small investors tried to cut their losses.
Here’s the most compelling: Share prices got way ahead of economic growth – now at its weakest since 2009 – and company profits, which are actually lower than a year ago.
“China’s stock markets haven’t yet fully matured as free markets”.
The weakness in mainland stocks, as well as sluggishness in global markets hurt investor sentiment in Hong Kong.
– Chinese stocks plunged Tuesday after mixed fortunes Monday, with the benchmark Shanghai Composite Index tumbling 3.2 per cent at opening.
These measures have seen the halting of 28 initial public offerings, allowing the country’s sovereign wealth fund to buy local shares, having the central bank provide liquidity for margin lending and forcing the country’s main stockbrokers to create a 120 billion yuan market stabilisation fund.
“After the market continued to fall despite myriad support measures, the government reached peak panic mode and must have anxious that investors would not only lose confidence in the markets, but in the government itself”, he said. Critics have noted that this generation of Chinese leadership, in place since late 2012, has called for market forces to gain more power, not less.
In the currency market, the Australian dollar fell to a six-year low of $0.7452 on Monday and last stood at $0.7480.
However, the moves appeared to cause more panic than confidence in the domestic market. They organized a group of 21 Chinese brokerages that collectively committed on Friday evening to purchase $19.3 billion in shares to stabilize stock prices.
Hong Hao, chief strategist of BOCOM worldwide, said it’s still too early to judge whether government emergency measures announced over the weekend would work to stabilise the market.
Traders are increasingly unnerved by the unusually large number of Chinese companies asking for their shares to be suspended from trading, fearing that many of them are looking for excuses to sit out the market turmoil.
The Chinese authorities have intervened to try to halt the rout in a manner that is hard to imagine a Western government or central bank would attempt.
“The China risk now looks to be becoming a bigger issue than Greece”, Will Yun, a commodities analysts at Hyundai Futures, said by phone from Seoul.
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Xiao Gang, chairman of the China Securities Regulatory Commission, vowed to maintain the stock market’s stability Saturday morning, setting off a series of measures by state-backed entities aimed at reassuring investors. The CSI 500 was smashed, losing 6.5%, while the Shenzhen Composite, Shanghai’s namesake to the south, slid 5.4%. The self-imposed deadline could be extended again, officials at the negotiations said. His post quickly spread and provoked a lot of online debate, particularly among those who had invested on the stock market.
