Chinese markets fell sharply Wednesday, even as officials scrambled to arrest a three-week stock selloff. The widespread selling has spilled into global markets and is deepening doubts about Beijing’s limits to halt it.
China has introduced fresh measures to restore investor confidence seemingly to little avail. Stocks and Chinese bonds traded offshore, even high-quality corporate bonds issued by top state-owned companies, are getting dumped. China’s yuan, freely traded in the offshore market, hit a four-month low against the U.S. dollar amid a dimming outlook for the world’s second-largest economy.
The Shanghai Composite SHCOMP, +6.34% fell 5.9% at 3507.19, after losses of as much as 8.2% earlier Wednesday. The index has lost 32.1% since its peak in mid-June. The smaller Shenzhen Composite 399106, +3.76% fell 2.5% at 1884.45, down 40% from its high last month.
The ChiNext board, which measures startups, ended up 0.5% at 2364.05 after regulators committed to buying small-cap stocks. The index remains down 40.6% since its June peak.
In Hong Kong, which has until recently fared better than the Chinese mainland, the benchmark Hang Seng Index HSI, +4.29% closed down 5.8%, wiping out all of its gains for the year. A gauge of Chinese companies with Hong Kong listingsHSCEI, +4.97% , known as H-shares, plunged 6.1%.
A spokesman for the China Securities Regulatory Commission, Deng Ge said in a statement that “irrational selloffs” had increased, and described the current market mood as “panic sentiment.”
Hundreds of Chinese stocks were frozen from trading Wednesday, with 1,287 companies halted. That represents 45.6% of the constituent stocks of the Shanghai Composite and Shenzhen Composite and $2.5 trillion of market capitalization, according to data from FactSet.
China has put an arsenal of measures to work in recent days to stem the selloff that has wiped out roughly $2.4 trillion in value from China’s equities. On Wednesday, the China Securities Regulatory Commission announced that the China Securities Finance Corp., a commission unit that provides financing for margin trading, will increase purchases of small-cap stocks. The move follows an earlier pledge by the company to buy blue-chip shares to stabilize the market. China’s central bank said it would help ensure the unit has ample liquidity to stabilize the market.
Also on Wednesday, regulators said they would ease rules for insurers to buy blue chips and said state-owned firms shouldn’t sell their holdings in publicly listed arms.
Beijing’s attempts are undoing liberalization efforts that the country had pursued during the past year, said Gan Ai Mee, an investment manager at Aberdeen Asset Management, which has $490.8 billion in assets under management, and less exposure to Chinese stocks relative to other markets in its portfolio.
“It doesn’t bode so well for investor confidence,” she said. “It’s a step backwards in terms of financial reforms they’re trying to put through.”
Investors’ shaken confidence also has dented the Chinese yuan. In the onshore market, the Chinese yuan USDCNY, -0.0193% hit 6.2094 per dollar, compared with 6.2100 as the market closed Tuesday. The price for the yuan in the offshore marketUSDCNH, -0.1334% where it can trade freely, fell to as low as 6.2290 per dollar — the weakest level since March 18 — compared with 6.2212 late Tuesday. China’s central bank fixed the yuan’s official rate for Wednesday at 6.1175 a dollar, a touch weaker than 6.1175 Tuesday.
[“source – marketwatch.com”]