China stocks plunge 6% as rout continues

The Shanghai Composite Index sank 6.4 percent to 2,749.79, marking its lowest close since December 2014, while the Shenzhen Component Index slumped 7 percent to close at 9,483.55.

Chinese shares plunged more than 6 percent to 14-month lows on Tuesday after oil prices dropped again, reviving concerns about global growth and prompting a selloff in the world’s equity markets. Chinese stocks have now lost 22 percent on the year as fears that the global economy is slowing permeate their markets, reports The Wall Street Journal.

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.

The Shanghai Composite’s 47% rout since June has been accompanied by an economy losing momentum, similar to the global financial crisis, when the gauge lost more than two- thirds of its value from peak to trough over the course of a year.

However, investors in China were nearly all panic in the shift of government policies and economic fundamentals, said by Chen Yong, market strategist for Lianxun Securities. “It’s been a bubble since it began last summer”, he said.

Dong and Li said they believe that after Tuesday’s loss, the Chinese stock markets have probably hit rock bottom, and are likely to slowly rebound.

The rand was up 1% at R16.36/$, after briefly scaling R16.35/$ – its strongest level since January 8 as traders and analysts factored in an interest rate hike when the South African Reserve Bank’s monetary policy committee concludes its meeting on Thursday.

“The volatility [in oil] is not helping restore confidence back in the market”, said Robert Levine, head of Asian sales and trading at brokerage CLSA, according to MarketWatch.

The renewed decline in oil prices weighed on US stocks which closed sharply lower on Monday.

Spot yuan was at 6.5802 on Wednesday, a little firmer than Tuesday’s close, while offshore it was 6.6088, a 0.4 percent discount to the onshore rate.

The China sell-off came despite the central bank flooding the market with cash to avert any possibility of shortages as short-term borrowings pick up ahead of the Chinese New Year holidays from February 8.

Major markets are deep in negative territory so far this year.

China’s central bank has jolted global financial markets twice in six months by allowing sharp, sudden slides in the currency, only to step in aggressively to stabilise it. China’s three state-owned petroleum giants rank among the largest companies here by capitalization behind state banks, giving them a good deal of sway over the market.