Chinese regulators are considering the suspension of initial public offerings (IPOs) to stabilize the country’s tumbling stock markets, people familiar with the matter said.
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China’s wild ride is unlikely to calm down any time soon, according to Reorient Group and Summit Research Partners.
Chinese shares plunged more than five percent within an hour of opening Tuesday before recovering, as markets took investors on a rollercoaster ride following heavy losses and a surprise weekend interest rate cut.
Like their counterparts throughout the world, investors in China are also grappling with the prospect of a Greek default and exit from the euro after bail-out talks broke down.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 6.7 percent, to 4,473.00, while the Shanghai Composite Index gained 5.6 percent, to 4,277.22 points.
Nearly 93 percent of equities in the gauge were trading above their 200-day moving average at the close on Monday, the highest proportion among 70 global benchmark indexes.
Experts remain generally puzzled by the stock market boom.
China’s benchmark Shanghai Composite Index has been climbing an uptrend line since the parabolic phase of the rally began in November.
Both Shanghai and Shenzhen have since fallen by more than 20 percent, a common definition of a bear market. They also cut interest rates three times before last weekend, and reduced lenders’ reserve requirement ratios twice.
Developing markets like Russian Federation, Bangladesh and Argentina have had similar bouts of volatility in the past few years.
“The government has said they’d like to see a slow bull market – unfortunately, that’s not what’s occurred”, with valuations reaching levels that were “way beyond anything you can wrap your head around”, he said. The Hong Kong stock exchange will be closed on Wednesday for a holiday, with trading resuming on Thursday.
BlackRock analysts describe the market as one where “sentiment rules, while valuation is an afterthought”. “I expect this back-and-forth to continue”.
As the bear market advances, capital flight from the mainland has exacerbated, meaning the liquidity released by the People’s Bank of China (PBoC) to support domestic market ends up in the overseas bourses, adding to speculative upward pressure there.
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India’s shares are expected to scale new highs, overcoming the recent sell-off by foreign investors who feared poor monsoon rains would hurt the farm sector and send inflation spiking, prompting the central bank to raise rates.
