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 The latest tumble followed similar declines in global markets and
reflected sharp across-the-board falls in Chinese stock index
futures as bears claimed victory over bulls on the settlement day
for August index futures contracts. <0#CIF:>
Friday's plunge may also have been exacerbated by a private survey
showing Chinese factory activity shrinking in August at the fastest
pace in nearly 6-1/2 years.
But many investors also pointed to signs that regulators' commitment
to pushing up the market has weakened. On Aug. 14, the China
Securities Regulatory Commission (CSRC) said it would allow market
forces to play a greater role, while keeping state investors
involved to maintain stability.
On Friday, the CSI300 index of the largest listed companies in
Shanghai and Shenzhen fell 4.6 percent, to 3,589.54, bringing the
week's loss to 11.9 percent - the worst performance since mid-June.
The CSI300 has now given up all the gains it made since mid-March.
DOUBLE-DIGIT TUMBLES
The Shanghai Composite Index <.SSEC> lost 4.2 percent, to 3,507.74
points. For the week, that index tumbled 11.5 percent, the sharpest
drop since the week ending July 3, and near the low it hit on July 9
during the height of the recent market rout.
Hong Kong shares fell in tandem. The Hang Seng Index <.HSI> lost 1.5
percent on Friday, and 6.6 percent this week, putting it back near
where it was in May 2014 and making it a bear market territory, with
a fall of more than 20 percent since April.
The China Securities Regulatory Commission (CSRC) made no mention of
this' week's slump during its regularly scheduled press conference
after market close on Friday, nor did it take questions on the
topic.
However, the CSRC announced on its official social media feed that
it is investigating major stakeholders in listed companies for
illegally selling off their shares.
According to regulations promulgated during the height of the market
collapse in July, Beijing prohibited those holding over 5 percent of
any given listed company's shares from selling for 6 months.
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Cosmetic investor sentiment was already bearish after an earlier
slump on Tuesday, when markets lost over 6 percent due to general
malaise over policy direction. Investors remain anxious after a
surprise decision on August 11 by the central bank to sharply
devalue the yuan.
DEEPENING WEAKNESS
That was followed by other signs of deepening weakness in the
world's second-largest economy, most recently the preliminary Caixin/Markit
China Manufacturing Purchasing Managers' Index (PMI) reading for
August, which fell from July's reading and disappointed forecasts.
"The sentiment remained relatively bearish for most of the week with
the poor economic data and absence of clear short-term positive
triggers adding downward pressure to the market," wrote Gerry
Alfonso, director at Shenwan Hongyuan Securities Co.
"The soft China Caixin PMI figure caused the market to close on
Friday rather poorly."
Investors dumped shares across the board, including companies with
investments from government rescue funds, making their share price
surges in the past days short-lived.
Money into these stocks backed by the "national team" - institutions
enlisted by the government to support the market - are speculative
in nature, according to Gui Haoming, analyst at Shenwan Hongyuan
Securities.
"Many market participants are totally at a loss, so they can only
make speculative bets on such concepts," he said.
Telecoms and tech stocks were among the weakest sectors, while
banking outperformed the broader market.
(Editing by Richard Borsuk)
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