China Stock Market Closes 6.4 Percent Lower As Oil Prices Fall

The CSI300 index fell 2.2 percent, to 2,875.10 points at the end of the morning session, while the Shanghai Composite Index (.SSEC) lost 2.8 percent, to 2,672.45 points.

Chinese shares had a rough start this year.

The ChiNext Index, the NASDAQ-style board of growth enterprises, also plummeted 7.63 percent, or 164.78 points to 1,994.05.

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

A 6-percent-plus collapse for Shanghai’s main stocks index led Asian markets lower.

Huang Weimin, whose Chinese stock index futures wagers returned more than 6,200% last year, said the Shanghai gauge could decline another 15% in the first half of the year as slowing economic growth and a weaker yuan spurred capital flight.

Beijing intervened to stem that rout and orchestrate a recovery of sorts, but anyone who mistook that for a bottom and bought back in will be nursing hefty losses again.

Traders reported that there was a bout of dollar buying in late trade on Tuesday as some investors took defensive tactics against the yuan’s further depreciation.

Overall, Chinese stock markets have now slumped about 22 percent so far in 2016 as concerns increase over a slowdown in the economy and confusion over the central bank’s foreign exchange policy.

Data showing outflows hit an estimated $1 trillion last year and investors are anxious about a possible cash squeeze even as the central bank flooded the financial system before the upcoming Chinese new year holiday.

China’s central bank said today it was injecting 440 billion yuan ($67 billion) into the money market, seeking to ease tight liquidity ahead of the Lunar New Year holiday when demand for funds surges. “That’s more than seven times the amount that left the country in 2014”.

A two-day market rebound was snapped yesterday when oil dipped back down below US$30 a barrel and China said it would slash steel production, a move that will trigger massive job losses.

“The inability to control capital outflows is the typical sign of crisis in emerging markets”, said Nathan Griffiths, a senior emerging-market equities manager at NN Investment Partners.

Market volatility, it said, was not a reflection of the economy but rather showed that the market, regulatory environment and investors still needed to mature. The depreciating yuan and slowing economic growth have been haunting the market for a while.

The U.S. Federal Reserve’s policy statement is due on Wednesday followed by the Bank of Japan’s announcement on Friday.