Behind China Market’s Latest Collapse: a Government Retreat

Scott Wren, senior global markets strategist at Wells Fargo Investment Institute said it’s a mistake to just hold China stocks by themselves, given the volatility.

After the upbeat Ifo survey of German business sentiment, the common currency was up 1.1 percent $1.1101 3 full cents above this month’s lows around $1.0810. But the euro has also tended to rise when investors get more concerned about global growth and rein in riskier bets, as they were doing on Monday.

In the United States, worries about China helped drive the Dow Jones Industrial index down by 128 points, or 0.7 per cent to 17,440 – its fifth drop in a row. Reuters also reports that Chinese stocks are still trading at stratospheric valuations.

Ian Winer, head of equity trading at Wedbush Securities, echoes the concern and remains anxious about the unprecedented government action taken to stop the bleeding in China stocks.

The benchmark Shanghai Composite Index plunged 8.48 percent to close at 3,725.56 points, in the sharpest daily drop since February 27, 2007.

The losing streak has hit three sessions now for the Indonesia stock market, which has lost nearly 135 points or 2.8 percent along the way. Analysts have been skeptical that such gravity-defying efforts could be sustained.

In a statement issued after markets closed on Monday, the China Securities Regulatory Commission said it would “continue to stabilize the market, to reassure public confidence, to safeguard against systemic risks”, attempting to quell rising panic among the country’s 90 million individual investors, according to CNN.

He added it would take some time for trading to become less volatile. Technology stocks were among the major losers in the U.S. market. But many small Chinese investors jumped into the market near its peak and are now sitting on significant losses. European stocks fell 2.2 percent and emerging-market shares lost 2 percent.

Weak economic data raised concerns about the health of the worlds’ second-largest economy (behind the US) saw investors panic sell.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 percent.

Federal Reserve as they try to assess when the central bank will start raising interest rates. “Once those disappear, the market cannot support itself”. Allergan’s shares also rose, up $24.31, or 8 percent, to $332.56.

ENERGY: Benchmark U.S. crude declined 26 cents to $47.13 per barrel in electronic trading on the New York Mercantile Exchange. High-yield and investment-grade names were mostly 2bps wider, but some Chinese property bonds made remarkable comebacks from Monday when some issues lost as much as 0.50-1.75 points.

The price of copper, heavily influenced by demand from key consumer China, recovered slightly to $5,213 a tonne on the London Metal Exchange.