Chinese shares tumble as Beijing steps in to buy again

Photo: Getty Images

It has been another ugly start for China’s stock market in Wednesday trade.

The benchmark Shanghai Composite index was down around 4% a short time ago while the CSI 300, that which comprises the largest listed firms on the Shanghai and Shenzhen exchanges, tanked 4.83% at the start of trade. Having hit multi-year peaks in early June, both have now fallen by over 31%.

The declines come despite a raft of measures from Chinese policymakers in recent weeks designed to boost stock prices. Interest rates have been cut, rules augmented to discourage selling while brokers, asset managers and Chinese insurers have all outlined plans to increase their exposure to the stocks.

So far nothing has succeeded in stemming the losses.

Today the government announced more measures to support the market. It has made it more expensive to bet that prices will continue to fall by shorting the index, and insurance companies will be allowed to increase their exposure to equities.

According to a report in the South China Morning Post, authorities will also expand their buying of stocks beyond blue-chip companies to smaller and mid-size companies.

A China Securities Regulatory Commission spokesman said markets were “full of panic emotion and the number of irrational selling has been increasing”, according to the SCMP.

“To restore the market back to normal, the China Securities Finance will continue to stabilise the share price of blue chips while it will increase the buying of small and medium sized stocks in a bid to solve the nervous market situation.”

More than 1000 listed Chinese companies have temporarily suspended trade on Wednesday in an attempt to avoid the market carnage. While they have escaped the declines for the moment, those firms that are still trading are feeling the full brunt of selling pressure.

The carnage in China is now spreading to other markets across the region. The Hang Seng in Hong Kong slumped more than 4% at the open while the Nikkei 225 in Japan and ASX 200 in Australia are off by more than 1.1%.

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