Update | Chinese markets routed as 51pc of A-shares in Shanghai and Shenzhen suspend trading; Hong Kong plunges
In unprecedented move, 1,429 or 51 per cent of all stocks listed in the Shanghai and Shenzhen exchanges voluntarily suspend trading of their stocks. Shanghai closes at 3-1/2 month low and Hong Kong falls over 2,100 points
Mainland Chinese stocks bled a sea of red ink to finish on Wednesday at a 3-1/2 month low due to panic selling sparked by an unprecedented 51 per cent of all listed shares now in voluntary suspension from trade, locking up some US$2.2 trillion of previously tradeable market capitalisation.
The carnage spilled into Hong Kong, where the Hang Seng index plunged over 2,100 points before bargain hunting clawed back the losses.
Hong Kong had its biggest single-day decline since October 2008 as foreign investors dumped Chinese shares amid fears about the mainland financial system following a 30 per cent free-fall in mainland stocks in less than a month.
The benchmark Shanghai Composite Index lost 5.9 per cent, or 219.93 points, to close at 3,507.19.
It was the lowest settlement for Shanghai since March 17. Since scaling a 7-year peak by ending at 5,166.35 on June 12, the market has tanked 1,659.16 points or 32.11 per cent in value.
The benchmark Hang Seng Index lost 5.84 per cent, or 1,458.75 points, to settle at 23,516.56, the biggest single-day fall since October 27, 2008 when Hong Kong stocks joined the rest of the world in diving at the height of the global financial crisis.
Watch: Beijing admits there's market panic as half of all China-listed companies halt trading
Regulators led by the China Securities Regulatory Commission (CSRC) tried to stanch the bleeding. They were joined by the country's central bank, the People's Bank of China.
“The stock markets now are full of panic emotion and the number of irrational selling has been increasing. This has led to intense liquidity in the market,” said Deng Ge, spokesman of the China Securities Regulatory Commission.
“To restore the market back to normal, the China Securities Finance will continue to stabilise the share price of blue chips while it will increase the buying of small and medium sized stocks in a bid to solve the nervous market situation.”
For its part, the PBOC said it would support liquidity in the market.
The other indices were pounded as well.
The Hang Seng China Enterprises Index lost 6.09 per cent, or 720 points, to end at 11,107.30.
In China, the Shenzhen Component Index which is dominated by smaller companies lost 2.94 per cent, or 334.71 points, to finish at 11040.89.
ChiNext, the country's version of the tech-heavy Nasdaq board in New York, climbed 0.51 per cent, or 12.04 points, to settle at 2364.05. It had dropped 2 per cent in the morning. It is the first time since June 30 that the index closed in positive territory.
Combined, Chinese equity markets have lost over US$3 trillion in the massive market sell-off that began in June.
The spark for today's selling spree was news that a total of 660 mainland Chinese companies requested that trading in their shares be suspended on Wednesday in an attempt to stave off further losses for their script.
That brought the total number of shares suspended in the mainland to 1,429, or 51 per cent of all stocks listed in the Shanghai and Shenzhen exchanges.
“The wave of suspensions has led investors to panic and they rushed to sell those shares which are still in trading for fear they may be suspended as well,” said Ben Kwong Man-bun, executive director and head of research of KGI Asia.
“The trend is likely to continue as the mainland market is still in the process of a correction from the previous overvaluation. The overseas markets are also haunted by the Greek crisis. Unless there is good news, the markets’ downturn will likely continue,” he said.
From cutting interest rates four times in the past seven months to easing margin rules to reducing bank reserve ratios, Beijing has tried to prop up equities while state media touted a long-term bull market.
On Wednesday, some 509 Shenzhen companies, most of whom are listed on the SME and ChiNext Board, as well as 151 Shanghai A-shares made the announcement late on Tuesday night that trading in their shares were to be suspended from Wednesday.
Most of the companies gave the reason for their suspension in that they “have some important project in preparation” and would give further announcements within the next five days or so.
“Many investors now invest in both Hong Kong and mainland stock markets. While half of all A-shares are suspended, Hong Kong stocks continue to trade, so some investors would sell their Hong Kong stockholdings for funding,” Kwong said.
Hong Kong Exchanges and Clearing chairman Chow Chung-kwong said on Wednesday the local bourse is closely monitoring the volatile market but has no intention to intervene at this time.
“The Hong Kong stock market was affected by two factors, the Greece debt crisis and the mainland stock market. Both have led to volatility in the Hong Kong stock market,” he said.
