Chinese stocks slammed as margin call selling overshadows latest government-led efforts to alleviate liquidity squeeze
- The benchmark Shanghai Composite Index declined 1.4 per cent at the midday break
- Eleven securities brokerages have agreed to form an asset management scheme worth 100 billion yuan to inject funds into troubled companies
Chinese and Hong Kong stocks slumped on Tuesday after two winning sessions, even as another action to rescue mainland listed companies caught in a liquidity squeeze was announced late Monday night.
The benchmark Shanghai Composite Index declined 1.4 per cent, or 36.46 points to 2,618.42 at the midday lunch break on Tuesday. The Shenzhen Composite Index, comprised mostly of smaller companies, dropped 1.2 per cent, or 16.29 points, to 1,309.44.
For now the market is not convinced the policies will actually help the economy, and investors are rushing to take profits and leave
In Hong Kong, the Hang Seng Index sank 2 per cent, or 530.32 points, to 25,622.83, while the Hang Seng China Enterprises Index was down 1.8 per cent, or 184.21 points, at 10,306.46.
The decline reversed the 4.1 per cent gain in the Shanghai gauge on Monday, the largest one-day advance in two and a half years, which was a result of a spate of government moves and officials’ speeches to bolster confidence since Friday.
“For now the market is not convinced the policies will actually help the economy, and investors are rushing to take profits and leave,” said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi Financial Group.
“We knew the gains on Monday were temporary, but nobody expected the policy effect to fade out so soon,” Pang added.