China stocks tumble again, close 7.6% lower
Shanghai (Aug 25) Chinese stocks tumbled Tuesday, bringing two-day losses to more than 15%, while other markets in Asia started to turn negative again after a bounce in earlier trading.
Shares in Shanghai SHCOMP, -7.63% finished down 7.6% at 2964.97 and fell as much as 8.2% in the afternoon. China’s main index breached the 3,000 level for the first time since December 2014. That follows a drop of 8.5% drop on Monday, the worst single-day loss in more than eight years.
Shares in Hong Kong HSI, +0.72% were down 0.7%, and the Nikkei Stock Average NIK, -3.96% closed 4% lower. Both benchmarks had risen as high as 2.9% and 1.6%, respectively, earlier in the day.
The lack of support from Beijing for the market continued to spook investors.
“The market feels like it’s self-imploding because it’s used to a lot of hand holding,” said Steve Wang, director of research at brokerage Reorient Group. Instead, regulators “are taking a wait and see approach… they intervened a lot in the past” and it didn’t work.
In its latest effort to counter intensifying capital outflows from a weakening economy and a tumbling stock market, China’s central bank on Tuesday injected more cash into the financial system. The People’s Bank of China offered 150 billion yuan ($23.40 billion) of seven-day reverse repurchase agreements, a form of short-term loan to commercial lenders, as part of a routine money market operation. The bank injected a net 150 billion yuan into the financial system last week, marking its biggest pump priming exercise since the early February.
But the move fell short of expectations for larger measures, such as a cut to bank’s reserve requirements which could free up hundreds of billions of yuan for loans.
Some analysts have said that even a cut in reserve ratio requirements of banks won’t be enough to rescue the market.
“The intensity of the global stock rout demands something more substantial from both the monetary and fiscal side,” said Bernard Aw at Singapore based brokerage IG.
“There are doubts whether China can cope with the persistent capital outflows, and domestic equity meltdown, given that it has already put in some heavy-hitting measures, and funded over $400 billion to a state agency to buy stocks,” said he added.
Some markets managed to hold on to their gains after a rebound in the morning.
Australia’s S&P ASX 200 XJO, +2.72% gained 2.7%, and South Korea’s Kospi SEU, +0.92% was up 0.9%. Singapore’s FTSE Strait Times was up 0.9%, and Taiwan’s Taiex Y9999, +3.58% bounced back by 3.6%.
Source: MarketWatch
