Share prices fall to worst 4-day decline since 1996
Print Edition
STOCKS tumbled to their deepest four-day decline since 1996 yesterday, with investors said to be concerned at a lack of government action.
The Shanghai Composite Index was down 7.63 percent to 2,964.97 points at the close, falling below 3,000 points for the first time since December.
The index fell 8.49 percent on Monday and in just four days has now lost 22 percent.
More than 700 shares fell by the 10 percent daily limit in Shanghai and Shenzhen, including most of the blue chips shares in the banking, securities and insurance sectors.
Bank of Communications lost 9.82 percent to 5.05 yuan.
Industrial and Commercial Bank of China, the nation’s second-largest company, fell 5.1 percent in its 11th day of decline.
The Shenzhen Component Index fell 7.04 percent to 10,197.94 points.
Zhang Qi, an analyst with Haitong Securities Co, said the steepness of the stock market decline was unprecedented and driven by panic selling by investors due to a lack of policy direction by the government.
Speculation over the government’s rescue intentions had escalated since August 14, when the China Securities Regulatory Commission said it would no longer add to holdings unless there was unusual volatility and a systemic risk.
Previously, the regulator had made no announcements about rescue operations, which is believed to have caused many investors to lose confidence in the government’s ability to stabilize the market.
“The government faces a dilemma,” said Lim Say Boon, chief investment officer with DBS Bank.
“It is the same moral hazard any government faces in intervening to achieve a non-market outcome in a market. If it does it half-heartedly, it has no credibility.
“If it agonizes over what, when and how much to spend, the markets will continue to dive,” he said.
China has been talked about as the trigger as well as the savior of global markets, he said, as it holds trillions of foreign reserves which could be poured into the markets or fiscal stimulus, which will be done in some stage.
Asian markets saw mixed results yesterday following “Black Monday,” with the Hang Seng Index up 0.72 percent to 21,404.96 points, while Japan’s Topix index fell 3.3 percent.
Australia’s S&P/ASX 200 Index rose 2.7 percent to recover from a two-year low while South Korea’s Kospi index gained 0.9 percent.
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