01/07/2015 13:20 AST
Chinese stocks tumbled in late trade, with the benchmark index almost erasing Tuesday’s rally, as margin traders unwound positions for a seventh straight day and data showed economic growth remaining sluggish.
The Shanghai Composite Index slid 5.2 percent to 4,053.70 at the close, after surging 5.5 percent Tuesday. Thirty-day volatility on the measure jumped to the highest level since December 2008. Industrial, commodity and financial companies led the rout, while 13 stocks fell for each that rose.
The benchmark equity measure rallied the most in six years Tuesday on speculation the government would take steps to support the $8.1 trillion stock market after shares sank more than 20 percent in two weeks. Regulators are considering suspending initial public offerings, people familiar with the matter said Monday, while the Economic Observer reported stamp duties may be cut.
“Sentiment is still cautious after the rebound yesterday due to uncertainty over the short-term market trend,” said Qian Qimin, an analyst at Shenwan Hongyuan Group Co., by phone from Shanghai. “Earlier expectations of a possible stamp tax cut and an IPO suspension failed to materialize, also disappointing investors. Investors are likely to be defensive in the near term.”
The CSI 300 Index lost 4.9 percent. Hong Kong’s stock market was closed for a holiday on Wednesday.
Margin debt on the Shanghai Stock Exchange fell to 1.34 trillion yuan ($216.1 billion) on Tuesday for the longest stretch of declines in three years. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150 percent gain in the 12 months through June 12.
World Bank
Large volatility in stock prices may undermine household consumption, Karlis Smits, a senior economist with the World Bank, said at a press briefing in Beijing on Wednesday.
Citic Securities Co., the biggest-listed Chinese securities firm, led declines for financial companies, slumping 5.7 percent. Haitong Securities Co. dropped 5.3 percent. Industrial & Commercial Bank of China Ltd. fell 2.7 percent, while China Life Insurance Co. dropped 5.3 percent.
The official Purchasing Managers’ Index was 50.2 for June, trailing the median estimate of 50.4 in a Bloomberg survey. A separate manufacturing index compiled by HSBC Holdings Plc and Markit Economics was at 49.4, missing the projection of 49.6.
“This is a sign of stabilization, but we haven’t seen any rapid rebound yet,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “A rebound needs more policy support,” including further reductions to the amount of cash banks must set aside, Ding said.
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