China's stock markets plunged in the final hour of trading on Wednesday, as a series of government measures on Monday night and through the day on Tuesday to prop up share prices once again proved to have little enduring effect.
The Shanghai and Shenzhen markets had seemed to recover on Tuesday afternoon and Wednesday morning after Chinese government agencies, companies and trade groups issued upbeat statements. The Chinese finance ministry said that it might allow the national pension fund to buy stocks, the China Securities Regulatory Commission denounced "irresponsible rumours" of market weakness and the government-affiliated Asset Management Association of China declared that a "structural rally is brewing."
Some analysts detected possible signs of large-scale, coordinated buying late Tuesday afternoon by state-controlled enterprises. Guotai, one of China's biggest brokerage firms, talked of plans to make it even easier for investors to trade stocks with borrowed money.
But by Wednesday afternoon, none of these measures seemed to have persuaded investors that now is a good time to own Chinese stocks. Share prices wilted, as waves of selling pushed the Shanghai stock market to a 5.2 per cent loss and the Shenzhen market to a 4.8 per cent decline.
With a handful of exceptions, Chinese regulations do not allow the price of a company's shares to fall more than 10 per cent in a single day. So losses as large as Wednesday's are a sign that many listings fell to the limit and may fall further on Thursday.
Wednesday's decline represented the second time in three days that government measures to shore up support for the stock market failed to have a lasting effect. After the Shanghai and Shenzhen markets each fell more than 7 per cent on Friday, China's central bank reduced interest rates late Saturday for one-year bank loans and deposits by a quarter percentage point and told banks that they could hold less of their deposits as reserves, freeing them to lend more. But after rising in the first hour of trading on Monday on the Chinese central bank's action, the Shanghai and Shenzhen markets both descended into bear markets later in the day, with prices more than 20 per cent below their high on June 12.
Even after recent declines, China's stock markets still have nearly doubled in the past 12 months. They have risen to these heights on a combination of heavy lending to investors by brokerage firms, hints that government stimulus programs might help the economy recover from a weak spring and numerous statements from government-controlled news organizations saying that stocks represented good investments.
The Shanghai market on Wednesday gave up essentially all of its gains from its rebound on Tuesday, closing at 4,053.7 - virtually indistinguishable from its close on Monday of 4,053.03. The Shenzhen market ended up slightly below its Monday close, at its lowest level since May 8.
Investors' worries may have increased with the Chinese government's release on Wednesday of its official survey of manufacturing purchasing managers' expectations during June for sales, orders and other indicators of commercial health. The survey was unchanged from May at 50.2, showing a very slight expansion in growth; many economists had expected an improvement, given that the Chinese government has been pursuing a series of stimulus measures that have included stepping up spending on new rail lines and other infrastructure as well as four reductions in interest rates since November.
The market decline on Wednesday created a flurry of dark humor on the Chinese Internet. Huashang Daily, a newspaper based in Xi'an, in west-central China, tried to interact with its 2.5 million followers on Weibo, a Chinese social media service, in a discussion of reactions to the market.
"Shot up yesterday, only to plunge today, how is your heart? Drop a line to describe your mood trading stocks recently," the newspaper posted around 3:30 p.m. Responses included: "Suicidal," "Speechless," "Be careful," "Thrill is exactly what I need," and even "Happy Birthday CPC," a swipe at the anniversary, coincidentally on Wednesday, of the Communist Party of China.
© The New York News Service 2015
