Chinese regulator vows share support after markets tumble 8.5 percent in a day

Mon Jul 27, 2015 1:14pm EDT
 
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By Samuel Shen and Pete Sweeney

SHANGHAI (Reuters) - China said on Monday it was prepared to buy shares to stabilize the stock market and avert "systemic risks", after major indices plunged more than 8 percent in the biggest one-day fall since 2007.

The securities regulator also said market authorities would deal severely with anyone engaged in the "malicious shorting of stocks", in Beijing's latest attempt to stave off a full-blown market crash.

Monday's slump, amid growing doubts about the strength of the world's second biggest economy, shattered three weeks of relative calm as a barrage of support measures helped stabilize values following a sharp sell-off that started in mid-June.

"The lesson from China's last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect," wrote Capital Economics analysts in a research note reacting to the slide.

The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen tumbled 8.6 percent to 3,818.73 points, while the Shanghai Composite Index .SSEC lost 8.5 percent to 3,725.56 points.

China's market gyrations have stoked fears among global investors about the broader health of the Chinese economy, hitting prices of growth-sensitive commodities such as copper, which fell on Monday to not far from a 6-year low. [MET/L]

But, while recent stock market weakness will have caught out many retail investors and companies who jumped in as stocks more than doubled in a year, the relatively low rate of stock ownership by households and a disconnect between valuations and economic fundamentals mean the impact on the economy is likely to be less than in other markets.

  Continued...

 
An investor stands in front of an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, July 27, 2015.  REUTERS/Stringer