China stocks are giving investors a nasty case of whiplash
China stocks resumed their volatile decline on Tuesday, compounding losses that have erased trillion of dollars in market value in recent weeks.
The Shanghai Composite dropped as much as 6% in morning trading, before bouncing back. The performance pushed China’s benchmark index further into bear market territory — defined as a loss of 20% from recent highs.
The smaller Shenzhen Composite, which is heavy on tech stocks, also fluctuated before spiraling down 6%.
The dramatic moves are the latest sign that investors remain fearful, and efforts by Beijing to calm the markets have failed.
The People’s Bank of China cut both its one-year lending and deposit rates by 0.25% on Saturday. In an additional move to shore up the economy and reassure investors, the bank also lowered the amount of cash that large banks must keep on reserve by 0.50%.
Analysts at HSBC said that the central bank was trying to engineer a “soft landing” for stocks.
“This could prove to be a difficult balancing act; and, ultimately, to shore up investors’ confidence, earnings growth needs to come through and the hefty valuations for small-cap growth stocks have to come down,” the HSBC analysts wrote.
Investors shrugged off the bank’s decision however, with shares in Shanghai losing 3.3% on Monday.
The China Securities Regulatory Commission took another run at reassuring investors late on Monday evening, issuing a statement that blamed “irresponsible internet hearsay” and critical commentaries for “disturbing market order.”
The statement, posted to the agency’s official Weibo account, also said that “risks are under control” and recent declines are the result of a normal market correction.
Even with recent losses, the Shanghai Composite has surged 25% this year, and the Shenzhen Composite is up 67%, easily making it the world’s top-performing index.
Source: moneyCNN – China stocks are giving investors a nasty case of whiplash
