“Another tumble by the Shanghai Composite merely reinforced the idea that the Chinese government is struggling to provide a tourniquet for its headline index, and caused the markets to open to more widespread losses after the bell”. Hong Kong’s Hang Seng index was down 1.1 percent to 23,228.11.
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“Wealthy investors, who have been through bear markets, are better at exiting”, said Hu Xingdou, an economics professor at the Beijing Institute of Technology.
Speculation about the degree of government intervention in stocks has increased, as the securities regulator on Friday indicated the state would reduce buying and data showed the richest traders were cashing out. The index has lost more than 850 points in the past four days.
Meanwhile, China’s Purchasing Managers’ Index (PMI) retreated to a five-month low of 50 in July, down from 50.2 in June.
Property companies also fell.
Another batch of US economic data will need to be digested today, with the latest weekly jobless numbers, existing home sales, and the Philadelphia Fed manufacturing survey for August all due.
Shares of importers and firms with high U.S. dollar-denominated debt have been under pressure following last week’s yuan devaluation. It has dropped more than 20 percent from the year’s peak hit in April.
“The market is still lacking in confidence”. The weak sentiment spread on Wednesday to the foreign exchange market, where the yuan fell away from the official reference rate set by the central bank each morning.
The rebound followed news the People’s Bank of China, the central bank, had made $17 billion (15.4 billion euros) available to more than a dozen financial institutions to help boost the economy. The authorities are providing another ¥170 billion through loans and an auction of deposits.
The yuan, which tanked last week after China’s shock devaluation but has shown signs of stabilizing after Beijing later worked to arrest its fall, has begun to feel the tremors from sliding Chinese equities.
Chinese equity valuations are still among the most expensive in the world.
In the end, markets finished a bit higher, but it didn’t look as if that would be the case earlier in the session.
China’s economy expanded 7.4 percent last year, its weakest pace since 1990, and has slowed further this year, growing 7.0 percent in each of the first two quarters.
All the 10 major sectors were lower, with the material index’s 1.06 percent fall leading the decliners. “The government doesn’t have enough money, or willingness to buy shares now”, said Samuel Chien, partner of hedge fund manager Shanghai Boom Trend Investment Management Co.
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Galaxy Entertainment Group slid 6.1 per cent, taking a nine-day plunge to 21 per cent. The company on Wednesday said first-half net income decreased 66 per cent from a year earlier.
