Asian equities tumbled yesterday as a collapse in Chinese shares began to contaminate other markets and after European leaders slapped Greece with a deadline to submit fresh bailout reform proposals.
With markets buffeted by two global crises, traders ran for the cover of investments considered safe in times of upheaval such as the yen.
Shanghai plunged 5.9 percent, or 219.93 points, to close at 3,507.19 after losing more than 8 percent at one point. The losses come despite Chinese leaders announcing fresh measures to staunch a correction that has wiped trillions off the country’s markets.
Among the latest interventions by Beijing, the country’s 111 major state-owned enterprises were barred from selling shares in their listed subsidiaries by the Chinese State-Owned Assets Supervision and Administration Commission, which oversees them.
For its part, the China Securities Regulatory Commission urged shareholders with stakes of more than 5 percent in listed companies to buy more.
The insurance industry regulator said Chinese insurance companies would be able to invest up to 10 percent of their assets in a single “blue chip” stock, up from the previous 5 percent.
Separately, the state-backed China Securities Finance Co (中國證金) is to “increase” stock purchases of small and medium-sized companies, while pledging 260 billion yuan (US$43 billion) in credit to brokerages for buying stocks.
The People’s Bank of China, the central bank, also pledged to support the “stable development” of the stock market by helping China Securities Finance Co raise funds, according to a statement on the bank’s Web site.
The Hang Seng index plunged 5.8 percent to close at 23,516.56, the lowest close since January.
Most other regional markets were also hit by the spillover effects, with many hosting companies with links to China.
Taipei shed 2.96 percent, or 274.05 points, to close at 8,976.11.
Tokyo sank 3.14 percent, or 638.95 points, to 19,737.64; Seoul slipped 1.18 percent, or 24.08 points, to 2,016.21; and Sydney retreated 2.01 percent, or 111.9 points, to 5,469.5.
“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch,” Wanda Futures Co (萬達期貨) analyst Zheng Ge (鄭戈) said.
Shanghai is down more than 30 percent from its closing peak on June 12, when it had risen by more than 150 percent in 12 months in a borrowing-fueled frenzy enhanced by hopes for economy-boosting government measures.
However, analysts said new restrictions on margin trading and concerns about the overvaluation of many stocks have forced Chinese investors — mostly individual retail traders — to cash out.
There are fears that the hammering to stock markets will hit the wider Chinese economy, the world’s second biggest, which is already struggling with slowing growth.
Yesterday’s falls came despite the government announcing new measures to support the market, while Bloomberg News reported that the recent slump has led at least 1,249 companies to halt trading in China, accounting for 43 percent of total listings.
“Gradually, this will drag other markets lower, because the magnitude of a China crisis would be far bigger than anything happening in Greece,” Hong Kong-based Ample Capital Ltd asset-management director Alex Wong (黃國英) said.
In Hong Kong, the Hang Seng China Enterprises Index — which tracks Chinese firms listed in the territory — slumped 8.5 percent.
“Chinese investors are selling the Hong Kong market to channel the money back to [mainland] A shares,” Hong Kong-based VC Brokerage Ltd (匯盈證券) director Louis Tse (謝明光) said. “Investors anticipate more measures to support mainland shares. Realistically, it’s obvious that Hong Kong will lose out.”
US-listed Chinese stocks — including Alibaba Group Holding Ltd (阿里巴巴) and Baidu Inc (百度) — took a hit as the shockwaves of the rout in Shanghai reverberated globally.
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