Business News: Chinese efforts to stem stock-market plunge fail

In this photo taken Monday, July 6, 2015, a stock investor monitors the Shanghai Composite Index at a brokerage house in Qingdao in east China’s Shandong province.

The Shanghai Composite Index opened 7.8 per cent higher, but ended the day up only 2.4 per cent, at 3,775.91 points.

The China Securities Regulatory Commission announced all initial public offerings on the Shanghai and Shenzhen stock exchanges have been suspended, and moved to increase liquidity and discourage short sellers.

Regulators have reduced the number of planned share sales to ease fears of a glut.

For a while, it looked like the gamble paid off. By the time the market peaked last month, it had risen by as much as 150 per cent since November.

The evaporation of fortunes of more than 80 million individual investors would pose unthinkable social problems for the country.

With all the talk of pension funds, brokers and insurers buying stock to support the market, it’s clear where their funds are being directed. Wang expects Beijing to power ahead with this program, despite the market’s downward trend, as foreign capital could help support the stock market. Still, the percentage of the Chinese population that dabbles in the stock market is comparatively low.

Wang Chaoyong, chairman and chief executive officer of ChinaEquity Group, said the moves by these listed companies were a demonstration of confidence both in their fundamentals and the nation’s economic transition. “But how effective they will be, we still need to wait and see”.

Over 700 Chinese companies have halted trading to “self preserve”, according to the state media.

Not only has action from above failed to turn markets around, but it has raised questions about whether China’s government is committed to the kinds of reforms needed to liberalise financial markets and cut excessive debt.

The Chinese authorities have intervened to try to halt the rout in a manner that is hard to imagine a Western government or central bank would attempt. The Shanghai Composite Index settled just above the 3,775-point plateau, and the market figures to be in for another wild ride again on Tuesday. It closed with a gain of 2.4% Monday.

Governments and central banks in South Korea and Japan were set to meet later Monday morning to handle the impact on the markets from Greece’s “no” vote, they said. When margin bets go sour, investors are forced to quickly pay back huge amounts of cash.

He said that leaves the Chinese government very exposed in protecting an over-valued market. “The hearts of small investors have become very fragile and they should stay away from the market until it is totally stabilised”. But don’t despair, counseled the People’s Daily, the Chinese Communist Party’s mouthpiece, on Monday: “Rainbows always appear after rains”.

Dong Tianyu, a consultant in Shanghai, said he and his wife invested 50,000 yuan ($10,760) in stocks at the end of past year. But those prices sold off during the day to close off by -6 percent from the opening.

A June 30 deadline for an agreement has come and gone, so now USA negotiators are hoping for a deal later this week.