China stocks fall again despite support measures

Tue Jul 7, 2015 7:59am EDT
 
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By Samuel Shen and Pete Sweeney

SHANGHAI (Reuters) - Chinese stocks fell on Tuesday, taking little comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang's failure to mention the market chaos in a statement on the economy.

Before the market opened, Li said in comments posted on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 percent off Chinese shares since mid-June.

After a brief pause in the slide on Monday, the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen ended down 1.8 percent on Tuesday, while the Shanghai Composite Index .SSEC lost 1.3 percent. [.SS]

The ChiNext growth board .CHINEXTC, home to some of China's giddiest small-cap valuations, fell 5.1 percent.

Qi Yifeng, analyst at consultancy CEBM, said government measures were not strong enough to reverse the downtrend, especially as it was a liquidity issue for many who had borrowed to buy shares and were now forced to sell to meet margin calls.

"It's just a matter of whether it will fall more slowly, or continue to slump in freefall," he said.

Exchange data shows the balance of outstanding margin loans has fallen more slowly than the market drop and that leveraging has consequently increased to a record proportion of the market, creating a vicious cycle of pressure to sell.

Global investors have grown increasingly concerned that a full-blown crash could destabilize the world's second-biggest economy.   Continued...

 
A man watches a board showing the graphs of stock prices at a brokerage office in Beijing, China, July 6, 2015. Chinese stocks rose on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilise the world's second-biggest economy.  REUTERS/Kim Kyung-Hoon