Stocks extend decline in China as government stays out
Government stops intervening after it has done with eliminating shadow margin trading
Chinese stocks crashed again on Tuesday in a virtual repeat of “Black Monday”, with Shanghai extending its four-day losses to 22 per cent as the “national team”, previously tasked with propping up the equity markets, sat on the bench.
The Shanghai Composite Index closed under 3,000 points for the first time this year, dropping 7.63 per cent to 2,964.967 points, while Shenzhen also fell more than 7 per cent. At the end of the day, 2,878 A shares had lost value and just 45 made gains.
“Market saving is over. The government will let the market go by itself. It is a totally different story now,” said Adam Xu, a fund manager at a state-owned mutual fund in Shanghai.
The “national team” entrusted with stabilising the market after the rout in June, namely China Securities Finance Corp along with managers of social security funds, was not buying up stocks as it did over the past two months, said market observers.
“I don’t think they are leaving the market. But the participation is declining. At this moment, they are not holding up the index or some stock prices, but are just there to avoid a liquidity crunch,” Xu said.
The focus on liquidity was evident in last night’s interest rate and reserve ratio cuts by the People’s Bank of China.