China Stocks Fall Amid Panic

Traders are increasingly nervous about the unusually large number of Chinese companies asking for their shares to be suspended from trading, fearing that many of them are looking for excuses to duck out of the market turmoil.

The Hang Seng Index had plunged as low as 4.97 percent in morning trade, and was at its lowest point since mid-March.

“This hodge podge of measures that have been undertaken by the government are so conflicted that I think it’s causing more confusion in the markets than it is delivering therapy”, said Ron Isana, CNBC’s senior analyst and commentator.

The news comes despite signs of heavy money flows into Shanghai’s blue chip stocks over the weekend to support equity indices. Hundreds more companies suspended trading before the market opened on Wednesday.

Chinese stocks led a slump in Asian markets on Wednesday as the sell-off in Shanghai intensified and Greece’s future in the euro remained highly uncertain.

Bank of America Merrill Lynch said China’s deleveraging and margin calls could be far from over, with no bottom seen until the government becomes buyer of last resort.

Even after the median price-to-earnings ratio in China dropped to 55 from 108 at the height of the rally in June, valuations are more than twice as high as those on the Standard & Poor’s 500 Index.

The China Association for Public Companies urged listed companies, major shareholders and management to buy back shares.

China’s stock market, the most high-flying in the world lately, is now mired in its inevitable crash.

Beijing’s interventionist response has also raised questions about its ability to enact the market liberalization steps that are a centerpiece of its economic reform agenda.

The securities regulator said the Securities Finance Corp had provided 260-billion yuan ($41.8-billion) to 21 brokerages. China’s stock market has been undergoing wild swings, sometimes opening with a spike of as much as 7%, before ending the day down by that much.

“It’s a stampede. And the problem of the market is that all the players move in the same direction, and are too emotional”.

The Chinese central bank made a surprise rate cut at the end of June.

The barrage of official commentary and new support measures continued on Wednesday.

The China Insurance Regulatory Commission said the amount of their assets Chinese insurers are allowed to invest in stocks will be increased to 40 percent from 30 percent. The Hang Seng China Enterprises Index, which tracks Hong Kong-listed mainland shares, shed 3.30 per cent, or 404.13 points, to 11,827.30.

A stock investor reacts in front of a screen showing stock market movements in a brokerage house in Shanghai on July 6, 2015.

Analysts said retail investors are part of the problem and the government should seek to build a class of institutional players, who trade for the longer term instead of merely seeking short-term gains.

Emerging-market stocks headed for the steepest slump in two years and currencies weakened as a deepening rout in Chinese equities spurred concern the fallout will spread.

In Shanghai, China’s financial capital and home to one of the Mainland’s 2 stock exchanges, the exuberance of the past year has faded as investors struggle with uncertainty over where the bottom is and when it will come.