China's stock slump sends region reeling
CHINA stock markets slumped again yesterday, giving up all their gains for the year on a massive sell-off that dragged down regional markets, with even some state media outlets saying the government rescue attempt had failed.
Chinese markets were down more than 9 per cent during the day and recovered only slightly by the close of trading. It was the worst daily performance since 2007 and a hair's breadth from the worst day since 1996, with traders blaming regulators' failure to act over the weekend after markets lost 11 per cent last week.
The downside was limited mostly by rules preventing any given stock from losing more than 10 per cent a day, and by the fact that many company shares are still under trading halts.
As much as 80 per cent of China's tradable stocks hit the downside limit during the day. And, ominously, all index futures contracts - for the CSI300, CSI500 and SSE50 indexes - were down the maximum 10 per cent.
Many Asia-Pacific markets were down yesterday. Singapore had its worst one-day plunge in seven years, with a 4.3 per cent drop. Tokyo fell 4.61 per cent to a six-month low. Sydney lost 4.09 per cent to finish at a two-year low.
After a year of heady gains, Chinese markets have been buffeted by more signs that economic growth is faltering, and Beijing's efforts to reassure and backstop stock investors have been sunk by weakening indicators.
Exchanges not only gave up all the gains made from Beijing's unprecedented stock market rescue last month, in which hundreds of billions of state dollars were pumped into the market, but have also now for the first time entered negative territory for the year.
"Policymakers look lost," Oliver Barron, an analyst at investment bank NSBO in Beijing, wrote in a research note, noting that confusion about intentions and approaches extended from stocks to monetary and exchange rate policy. "But the market needs bigger things: growth, reform, easing. Piecemeal support is not enough any more."
Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney, told Bloomberg News: "You really need rate cuts and more policy easing in China. In the meantime, things can get worse."
REUTERS, AGENCE FRANCE-PRESSE