Courtesy of Mish.
Nosedive Panic
The crash in Chinese equities continues amid regulators’ talk of panic and irrational selling.
Ironically, China has banned the use of terms like ‘equity disaster’ and ‘rescue the market’ in analyst’s reports on the stock market.
Over Half of Companies Halted
The Guardian reports China Stock Markets Continue Nosedive as Regulator Warns of Panic.
Chinese stock markets tumbled again on Wednesday as investors shrugged off a series of support measures by Chinese regulators, including the central bank’s first public statement in support of the market since it cut interest rates in late June.
Minutes after opening, the Shanghai Composite Index fell by just over 8%. while the Shenzhen Component was down almost 5%.
Within ten minutes of trading, more than 1,000 shares across China’s two stock markets had dropped by the daily limited of 10% and had their shares automatically suspended. About 1,400 companies, or more than half of those listed – filed for a trading halt in an attempt to prevent further losses.
Christopher Balding, a professor of economics at Peking University said that while it was not possible to know exactly why so many companies had suspended trading, a large number were doing so because they had used their own stock as collateral for loans and they want to “lock in the value for the collateral”.
Balding said: “I don’t see it getting better. There is not going to be a turn around within the next week or two.”
“It probably has a long way to go. Margin loans basically rose much faster and they are not falling nearly as fast, margin debt is not falling nearly as fast as the market is falling. What that is telling us is that there is a lot of stock that needs to be sold that hasn’t been sold yet.”
Fresh Turmoil
The Financial Times reports Fresh Turmoil Hits China’s Stock Market. …
