|
 Major indexes suffered their largest one-day drop since 2007,
shattering three weeks of relative calm in China's volatile stock
markets since Beijing unleashed a barrage of support measures to
arrest a slump that had started in mid-June.
"The lesson from China's last equity bubble is that, once sentiment
has soured, policy interventions aimed at shoring up prices have
only a short-lived effect," wrote Capital Economics analysts in a
research note reacting to the slide.
The CSI300 index <.CSI300> of the largest listed companies in
Shanghai and Shenzhen plunged 8.6 percent, to 3,818.73 points, while
the Shanghai Composite Index <.SSEC> lost 8.5 percent, to 3,725.56
points.
China's market gyrations have stoked fears among global investors
about the broader health of the world's second biggest economy,
hitting prices of growth-sensitive commodities such as copper, which
fell on Monday to not far from a six-year low. [MET/L]
FUTURES TUMBLE
Stocks fell across the board on Monday, with 2,247 companies
falling, leaving only 77 gainers.
More than 1,500 shares listed in Shanghai and Shenzhen dived by
their 10 percent daily limit, led by index heavyweights including
China Unicom <600050.SS>, Bank of Communications <601328.SS> and
PetroChina <600028.SS>.
All traded index futures contracts also fell by their maximum 10
percent limit, with the exception of a few tracking the large cap
SSE50 index, which declined around 9 percent.
Analysts struggled to explain the severity of the sell-off, which
accelerated sharply in the afternoon session, long after investors
had time to digest the latest economic releases.
Markets had opened down more than 2 percent, following lackluster
data on profit at Chinese industrial firms on Monday and a
disappointing private factory sector survey on Friday.
But Chinese stock investors have been celebrating bad economic news
for months on the basis it would provoke more aggressive policy
easing, seen as positive for stocks because it pushes cheap money
into the market.
Some saw the government-induced recovery in share prices in recent
weeks as itself provoking the crash.
"After two weeks of steady rebound, both foreign investors and
domestic institutions are gradually taking profits, increasing
selling pressures," said Yu Jun, strategist at Bosera Asset
Management Co.
"In addition, investor confidence hasn't fully recovered. There has
been no obvious increase in outstanding margin loans, while the
amount of fresh capital inflows is much lower than the average level
in May and June. With not enough money taking up the baton, a
renewed, sharp correction is inevitable."
[to top of second column] |
CONFIDENCE GAME
China's main stock indexes had more than doubled over the year to
mid-June, when a sudden swoon saw shares lose more than 30 percent
of there value in a matter of weeks.
Markets finally began stabilizing again in the second week of July,
due almost entirely to an all-out effort from Beijing to pump
liquidity into the market while barring investors from selling off.
China's central bank cut interest rates, brokerages formed
stabilization funds and regulators lifted restrictions on pensions
and insurers investing in stocks, an implied combined total verbal
commitment of almost $800 billion.
Beijing also cracked down on "malicious" short-sellers in the
futures market, froze IPOs to prevent a liquidity drain and looked
the other way as around 40 percent of companies suspended trading in
their shares to escape the rout.
The campaign even acquired nationalistic tones at times, with local
governments calling on retail investors to "defend the stock market"
and domestic media and popular commentators expressing suspicions
that the crash had been engineered by a foreign cabal.
Chinese share markets had recovered around 15 percent from their
early-July trough before Monday's renewed sell-off.
However, analysts were sceptical of how long the campaign could be
sustained, given the fright retail investors took at the speed and
scale of a slump that wiped out as much as $4 trillion in stock
market capitalization before Beijing grabbed the wheel.
Some analysts say the primary problem is that a market that rose so
sharply on the expectations of aggressive easing from Beijing is
seeing diminishing returns from future loosening, especially if the
United States adapts its monetary policy.
"The main factor of today's fall is attributable to the uncertainty
of the future monetary policy," said Du Changchun, stock analyst at
Northeast Securities. "The rising CPI, particularly the rising pork
price, has made it harder for the monetary authorities to roll out
more easing measures."
(Editing by Alex Richardson and Richard Borsuk)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
