RTÉ News: China stocks sink as regulator warns of ‘panic

Bloomberg News reported that trading has been suspended on more than 1,200 shares in China.

Stocks in Shanghai have dropped more than 30 percent% since its June 12 peak after reaching incredible highs. “China’s government has a lot of tools to support the market”.

Chinese authorities have tried to reassure investors the price decline is normal following a boom that saw the Shanghai index soar by more than 150 per cent since late 2014.

Jackson, of IHS Global Insight, noted a survey by the Southwestern University of Finance found 8.8 per cent of households participated in the stock market in the second quarter of this year, up from 6.1 per cent in the first quarter. Horizon fell 55 cents, or 2 percent, to $33.95, while Depomed soared $7.50, or 36 percent, to $28.14. Share prices got way ahead of growth and company profits, which are actually lower than a year ago. That represents 45.6 per cent of the constituent stocks of the Shanghai Composite and Shenzhen Composite and $US2.5 trillion of market capitalisation, according to data from FactSet. The China Securities Regulatory Commission banned trading with funds borrowed outside the margin trading system. He said in a statement: “Irrational sell-offs have increased greatly and that has led to a liquidity tension in the stock market”.

“Investors started selling heavyweight blue chips as there is no liquidity left in the small company stocks, which means there are very few of these companies they can sell”.

Pessimism has spread to Hong Kong, where the Hang Seng index dropped 4.2 percent, while the Hong Kong China Enterprises Index slumped 5.3 percent.

China’s biggest stock-market rout since 1992 has done nothing to erode the bullish outlook of Goldman Sachs Group Inc.

Chinese officials are obviously panicked by the stock collapse. The confidence restoring measures however have failed to stem the share price falls.

According to the Financial Times, “State media cheerleading for the stock market played to patriotic sentiment, arguing that the rally was an endorsement of (President) Xi’s economic policies”. “The so-called bull market is over for now”, said Jackson Wong, an associate director at United Simsen Securities Ltd.

But today’s plunge in China, following yesterday’s sell-off, reinforces doubts about the effectiveness of Beijing’s rescue efforts. Even so, over the past year, the market is still up by more than 80%-a spectacular gain. “Our biggest concern is that the progress of structural reform could suffer as the result”. Everything is down. The riskier the bonds, the heavier they’re being sold. Bond prices move inversely to yield. The increase in company share which can not trade has hit 40% over night.

German 10-year bond yields fell to their lowest level since early June.

Kevin Norrish, a commodities analyst at Barclays, said: ‘China is the largest consumer of copper. Why welcome such a risk-management nightmare in a nation that already has too many ghost cities?

There are plenty of experts who fretted over China’s experiment with capitalism and local investors are learning the hard way that the pitfalls of such a freewheeling stockmarket can have ramifications.

European benchmarks, though, opened higher and the euro rose as investors there woke up to news that European leaders gave Greece a last-minute chance to avoid a ruinous exit from the euro currency.