By increasing demand for them, the government hopes prices will rise. As the slide highlighted on Monday, those efforts have not been a success.
“I think more uncertainty lies ahead”, Mr Madden said. The gloom was shared across the region. PetroChina Co., long considered a favorite holding of state-linked rescue funds, tumbled 4.9 percent. More than 40 million new stock accounts were opened between June 2014 and May 2015.
A 9 per cent drop in the value of Chinese equities has alarmed world markets.
“It is a high wire act which seeks both to preserve the monopoly of power of the Chinese Communist Party while simultaneously allowing the market to determine the allocation of resources”, he said. Most Asian currencies fell against the dollar, including the Malaysian ringgit, which slipped 1.5 per cent in late trading.
It is now trading at the lowest level since mid-March, and has wiped out all of this year’s gains.
Commodity prices are also nosediving. A Bloomberg index of total returns on commodities fell to its lowest level since 2002. Asian shares hit a three-year low Monday, and the nervousness appeared likely to spread to Wall Street after last week’s sharp falls there. Investors may be losing confidence in China’s ability to micro-manage the financial sector – and steer a slowing economy. “China’s knock-on effect on the rest of the world is huge and China’s deepening economic slowdown will have an impact for the next couple months or so”.
Monday’s decline threatened to weigh anew on global markets after last week’s Chinese losses triggered a worldwide selloff. “But it is questionable whether even with one the market would have rebounded”. “The most important step is to see China take further action to try to bring their economy to a 7 percent growth path”, said Rajiv Biswas, Asia-Pacific chief economist for IHS.
The market regulator has also issued reassurances that the CSF will continue to soothe market volatility “for several years”, although that has not been enough to reassure investors. “After 30 years, China’s old economic model has broken down and actual growth is much weaker than anything we’ve seen before”.
Concerns growth is decelerating in the world’s number two economy were fuelled on Friday when the preliminary figure for Caixin’s purchasing managers’ index for August, a key indicator of manufacturing activity, slumped to a 77-month low. So they began to tighten limits on debt-financed stock market speculation. MSCI’s emerging market index plumbed a six-year low. (CSF) to buy stocks on behalf of the government and barring major shareholders from selling their stakes. A 1.1 percent fall in S&P 500 mini futures suggested sentiment remained weak.
Sony Corp.’s shares fell 8.0 percent Monday, while Toyota Motor Corp.’s shares dropped 6.8 percent.
“Investors are taking a safety first approach to the stock market given the potential for instability related to capital flight from emerging economies”, Ric Spooner, a market strategist for CMC Markets, said in a commentary.
China’s cabinet has published the final guideline on investment for the country’s massive pension fund yesterday, effectively opening the gate for more diversified and riskier products.
Earlier this month, the Chinese central bank devalued the yuan in an attempt to boost exports.
This in turn could throw the US Federal Reserve and Bank of England’s plans to raise interest rates in the near future out of the window.