Shanghai stocks end down 5.90% despite government boost

Such reassurance has done little to halt the declines.

A woman rubs her face as she stands at a computer terminal in a stock brokerage house in Nantong in eastern China’s Jiangsu province Wednesday, July 8, 2015. It said they are required to buy more if the price falls by more than 30 per cent in the next 10 days.

The Singapore Straits Times said the mainland share prices started its downward spiral when China’s securities regulator warned that it would tighten rules on margin trading for individual investors. 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.

Zheshang Securities analyst Zhang Yanbing said: “Selling of blue chips dragged down the Shanghai market this morning”.

That has prompted hundreds of companies to ask the mainland’s two exchanges to suspend trading in their shares after prices of some fell by more than 50 percent.

Today, the government said Chinese insurance companies will be able to invest up to 10 per cent of their assets in a single “blue chip” stock, up from the previous five per cent.

The official Shanghai Securities News reported on Tuesday that China’s major insurance firms ploughed tens of billions of yuan into blue-chip exchange-traded funds (ETF) and large caps on Monday. The broader Topix index of all first-section shares dived 3.34 per cent, or 54.75 points, to 1582.48. The People’s Bank of China statement was read on state TV’s national midday news.

HSBC analyst Julia Wang told RN Breakfast it is a tense time, but the number of ordinary Chinese with money in the market is relatively small.

Memo to President Xi Jinping: Suppose some of the $4 trillion worth of debt amassed by local governments in recent years were to go sour (many already have, but you don’t do transparency).

Over the weekend, Beijing suspended initial public offerings and made it easier for investors to borrow to buy stocks. The following day, the China Securities Regulatory Commission (CSRC) also banned trading with funds borrowed outside the margin trading system.

The central bank said it will provide “ample liquidity to support stock market stability” through a government-owned company that lends to brokerages to finance share purchases, a practice known as margin lending.

“The rescue plan could potentially increase the systemic risk down the road”, analysts from Société Générale wrote in a research report.

WALL STREET: Stocks in the US fell broadly Monday following drops in overseas markets as Greeks voted to reject creditor conditions for more loans, but the losses weren’t as steep as many had feared. “Our biggest concern is that the progress of structural reform could suffer as the result”.

Authorities admitted panic selling had taken hold among Chinese investors. Bond prices move inversely to yield.

However, H shares of same companies in Hong Kong saw further decline.

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

The China rout also battered investor sentiment elsewhere in Asia, with other major markets finishing sharply lower.

China is the world’s top copper consumer, accounting for about 40 per cent of global consumption. But they also acknowledged that the ten-day suspensions can be extended for three months.