China’s Stocks Dive To Lowest Close Since 2014

ASIA’S DAY: The Shanghai Composite dropped 6.4 percent to finish at 2,749.78, the lowest since December 2014, when the index was beginning a rally that peaked last June.

China’s woes and plummeting oil prices have damaged risk appetite across the world’s financial markets, and are complicating the policy calculations of leading central banks.

Stocks that could be dumped in the secondary market as a result of their shareholders’ failure to top up margin accounts following the selloff on Tuesday may comprise about 8 percent of China’s floating market capitalization, Gao Ting, the head of China strategy at UBS in Shanghai, wrote in an e-mail on Wednesday. There is a market volatility looming over the country because of its growth concerns.

According to Wu Kan, a fund manager at JK Life Insurance Co.in Shanghai, “It’s an issue about confidence and there’s no confidence in the market now”. While the restructuring was seen as positive for the company, its share price was catching up with the market’s losses during its suspension, traders said.

China’s economic growth slowed to 6.8% in Q-4, bringing the full-year growth to 6.9% in Y 2015, the poorest showing in 25 years. This could cost the Chinese 400,000 jobs. There is also a deep rooted concern about the debt-financed investment.

On January 7, the CSI300 plunged 7 percent, triggering the mechanism for the second time, and trading was halted just half an hour after the market opened that day.

The prominent Chinese bank that was in the news for fraud recently is the Agricultural Bank of China. The slump has been seen in pretty much all industry groups, ranging from technology to commodity shares.

The central bank has responded with a series of aggressive measures to inject more cash into the system and has pledged to do more after meeting with commercial banks late last week. The central bank typically does so at this time of year to ensure adequate liquidity in the country’s banking system, as demand for cash rises around the holiday.

Analysts have warned of more declines ahead, with the 2,500 level increasingly becoming the level at which China’s main stock indexes may find a bottom. Brent oil dropped to a long-term low of $US27.88 on January 20, but had lifted to more than $US32 on Monday, prompting a return to buying hard-hit Australian oil and gas stocks. Major exchanges Nikkei 225, Kospi, and Hang Seng all posted losses, as did most other regional markets.

“Chinese markets look like they will continue to sell off until their last day of trading before Chinese New Year on February 5”, market analyst at Spreadbettor IG Angus Nicholson told CNBC.com. This happened within 30 minutes of market opening.

Many investors have lost the stomach for the market after a wild ride since summer past year, when shares crashed 40 percent.