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Chinese stocks opened down on Tuesday, taking no comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang’s failure to mention the market chaos in a statement on the economy. Before the market opened, Li said in comments on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 per cent off Chinese shares since mid-June.
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Chinese stocks opened down on Tuesday…… • taking no comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang’sfailure to mention the market chaos in a statement on the economy. • Before the market opened, Li said in comments on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 per cent off Chinese shares since mid-June. • After a brief pause to the slide on Monday, the CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 4.8 per cent in early trading on Tuesday, while the Shanghai Composite Index shed 3.4 per cent. • The ChiNext growth board, home to some of China’s giddiest small-cap valuations, fell 5.1 per cent. • In an attempt to halt the slide, China has arranged a curb on new share issues and orchestrated brokerages and fund managers to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn has a direct line of liquidity from the central bank.
China Life Insurance Co. Ltd. • The official Shanghai Securities News reported on Tuesday that China’s major insurance firms ploughed tens of billions of yuan into blue-chip exchange-traded funds (ETF) and large caps on Monday. • bought a net 10 billion yuan ($1.6 billion) in index funds, while China Pacific Insurance Group and other insurers each invested more than 1 billion yuan, the newspaper said. That helped the indexes rise just over 2 per cent on Monday, but the relief was shortlived. • Lei Mao, assistant professor of finance at Warwick Business School, said government measures to support market distorted the allocation of funds and trading behaviour and could create the conditions for further sharp falls.“Even an optimistic investor should not participate in the market for now,” he said. • Traders are increasingly unnerved by the unusually large number of Chinese companies asking for their shares to be suspended from trading, fearing that many of them are looking for excuses to sit out the market turmoil.
Out of hand The rapid decline of China’s previously booming stock market, which had more than doubled in the year to mid-June, had become a major headache for President Xi Jinping and China’s top leaders, who are already struggling to avert a sharper economic slowdown. Even China’s bullish securities regulators admitted that markets had become too frothy before they turned down, but the slide quickly showed signs of getting out of hand. A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other “stability measures” did little to calm investors, many of whom have borrowed heavily to play the stock market.
