Chinese stocks go on wild ride as economic gloom deepens
By Samuel Shen and Kevin Yao
SHANGHAI/BEIJING (Reuters) - Chinese stock markets took a wild ride on Wednesday, tumbling and soaring in a session that made little sense other than to highlight that investors have almost no faith in a month-long government effort to stabilize them.
The Shanghai and Shenzhen markets fell 3 percent in morning trade, taking their losses to more than 8 percent since investors stampeded without warning on Tuesday.
But state-backed buyers later rushed in, enabling stocks to finish the day more than 1 percent higher.
It is a pattern that has been repeated several times since Beijing's "national team", a coalition of state-backed financial institutions and regulators, went into action early last month with instructions to halt a crash in share prices.
Investors say China's stock markets - which were never for the faint of heart - have become dysfunctional since the government's massive and unprecedented rescue effort.
Prices move sharply on speculation about the national team's activities as investors focus on making quick trading profits by pre-empting its next move.
Late in the afternoon on Wednesday, a slew of companies announced state funds had bought stakes in them, which investors took as a sign that the government was signaling its continued support for the market. As of early evening, around 20 firms had made such announcements.
Long-term investors are staying well to the sidelines, moving their cash into bonds and the money market, as roller-coaster markets and a gloomy stream of economic news heighten their anxiety over the world's second-largest economy. Continued...