China’s stocks fell, capping the benchmark index’s biggest monthly fall since August 2009, as the government struggles to rekindle investor interest amid a US$3.5 trillion rout.
The Shanghai Composite Index slid 1.1 percent to 3,663.73 at the close yesterday, dragged down by energy and industrial companies. The gauge tumbled 15 percent this month, the biggest loss among 93 global benchmark gauges tracked by Bloomberg, as margin traders cashed out and new equity-account openings tumbled amid concerns valuations are unsustainable.
While unprecedented state intervention spurred a 18 percent rebound by the Shanghai Composite from its July 8 low, volatility returned on Monday when the gauge plunged 8.5 percent.
The Shanghai Composite extended its losses yesterday afternoon after Reuters reported that Chinese regulators had asked financial institutions in Singapore and Hong Kong for stock-trading records as part of efforts to track down investors betting against shares in China.
The China Securities Regulatory Commission asked for the records to try to identify investors who took net short positions against China’s stock markets, Reuters said, citing sources that it did not identify.
Trading in 505 companies was halted on the Shanghai and Shenzhen exchanges yesterday, or equivalent of 18 percent of all listings.
Trading this week has been marked by unexplained late-day swings on equity indices. On Thursday, the Shanghai Composite tumbled 2.2 percent in the final hour of trading to erase a 1.5 percent gain.
The move was almost a reverse image of the previous day, when the Shanghai gauge surged in the final 60 minutes of trading to close 3.4 percent higher.
“The support measures may have been less effective than what Beijing imagined,” said Bernard Aw, a strategist at IG Asia in Singapore.
The Hang Seng China Enterprises Index of mainland shares in Hong Kong has tumbled 14 percent this month, poised for its worst loss since September 2011. The gauge lost 0.3 percent yesterday, while the Hang Seng Index advanced 0.1 percent. The CSI 300 Index was little changed.
Industrial & Commercial Bank of China Ltd (中國工商銀行) was the biggest drag on the Shanghai Composite this month, sinking 8.5 percent. China Petroleum & Chemical Corp (中國石油化學) tumbled 15 percent, while Ping An Insurance Co (平安保險) plunged 19 percent.
Turnover has fallen as volatility has surged. The value of shares traded on the Shanghai exchange on Thursday was 53 percent below the June 8 peak, while a 100-day measure of price swings on the Shanghai Composite climbed to its highest level in six years yesterday.
Valuations remain elevated after a 29 percent drop by the benchmark equity gauge.
The median stock on China’s bourses trades at 66 times reported earnings, higher than in any of the world’s 10 largest markets, according to data compiled by Bloomberg. That compares with a multiple of 13 in Hong Kong.
“The volatility in A-share markets, which was boosted by the surge in margin financing, has made share price performance deviate from the value of stocks in unpredictable ways,” LGM Investments portfolio manager June Lui said. “We have been cautious on investing in A shares.”
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