Thursday, 28th March 2024
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Chinese markets fall, ignoring Beijing’s soothing efforts

CHINA'S stock markets plunged in the final hour of trading, as a series of government measures to prop up share prices once again proved to have little enduring effect. The Shanghai and Shenzhen markets had seemed to recover on Tuesday afternoon and Wednesday morning after Chinese government agencies, companies and trade groups issued upbeat statements.…

China stock exchangesCHINA’S stock markets plunged in the final hour of trading, as a series of government measures to prop up share prices once again proved to have little enduring effect.

The Shanghai and Shenzhen markets had seemed to recover on Tuesday afternoon and Wednesday morning after Chinese government agencies, companies and trade groups issued upbeat statements. The Chinese Finance Ministry said that it might allow the national pension fund to buy stocks, the China Securities Regulatory Commission denounced ìirresponsible rumorsî of market weakness and the government-affiliated Asset Management Association of China declared that a ìstructural rally is brewing.î

Some analysts detected possible signs of large-scale, coordinated buying late Tuesday afternoon by state-controlled enterprises. Guotai, one of Chinaís biggest brokerage firms, talked of plans to make it even easier for investors to trade stocks with borrowed money.

But by Wednesday afternoon, none of these measures seemed to have persuaded investors that now is a good time to own Chinese stocks. Share prices wilted, as waves of selling pushed the Shanghai stock market to a 5.2 percent loss and the Shenzhen market to a 4.8 percent decline.

With a handful of exceptions, Chinese regulations do not allow the price of a companyís shares to fall more than 10 percent in a single day. So losses as large as Wednesdayís are a sign that some listings fell to the limit and may fall further on Thursday.

Wednesdayís decline represented the second time in three days that government measures to shore up support for the stock market failed to have a lasting effect. After the Shanghai and Shenzhen markets each fell more than 7 percent on Friday, Chinaís central bank reduced interest rates late Saturday for one-year bank loans and deposits by a quarter percentage point and told banks that they could hold less of their deposits as reserves, freeing them to lend more.

But after rising in the first hour of trading on Monday on the Chinese central bankís action, the Shanghai and Shenzhen markets both descended into bear markets later in the day, with prices more than 20 percent below their high on June 12.

Even after recent declines, Chinaís stock markets still have nearly doubled in the past 12 months. They have risen to these heights on a combination of heavy lending to investors by brokerage firms, hints that government stimulus programs might help the economy recover from a weak spring and numerous statements from government-controlled news organizations saying that stocks represented good investments.

The Shanghai market on Wednesday gave up essentially all of its gains from its rebound on Tuesday, closing at 4,053.7 ó virtually indistinguishable from its close on Monday of 4,053.03. The Shenzhen market ended up slightly below its Monday close, at its lowest level since May 8.

Investorsí worries may have increased with the Chinese governmentís release on Wednesday of its official survey of manufacturing purchasing managersí expectations during June for sales, orders and other indicators of commercial health.

The survey was unchanged from May at 50.2, showing a very slight expansion in growth; many economists had expected an improvement, given that the Chinese government has been pursuing a series of stimulus measures that have included stepping up spending on new rail lines and other infrastructure as well as four reductions in interest rates since November.

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