Saturday 16 December 2017

China's stock market crash worsens as 500 more firms suspend trading

A stock investor covers his eyes at a brokerage house in Fuyang in central China's Anhui province. Photo: AP
A stock investor covers his eyes at a brokerage house in Fuyang in central China's Anhui province. Photo: AP

Samuel Shen

China's crisis-hit stock market showed signs of seizing up altogether yesterday, as more companies scrambled to escape the rout by having their shares suspended and after the securities regulator warned of "panic sentiment" gripping investors.

Beijing has struggled without success to bend the market to its will, unveiling a fresh battery of measures to arrest the sell-off. The People's Bank of China said it would step up support to brokerages enlisted to prop up shares.

And in a shock move, regulators banned major shareholders, executives and directors from selling stakes in listed companies for six months in desperate attempt to halt the rout.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 6.8pc, while the Shanghai Composite Index dropped 5.9pc.

More than 500 China-listed firms announced trading halts in Shanghai and Shenzhen yesterday, taking total suspensions to about 1,300 - 45pc of the market or roughly €2.2 trillion worth of stock - as companies scuttled to sit out the carnage.

Margin calls forced leveraged investors to dump shares that could find a buyer, meaning better regarded so-called blue chips that had been supported by stabilisation funds earlier in the week were hit. "I've never seen this kind of slump before. I don't think anyone has. Liquidity is totally depleted," said Du Changchun, an analyst at Northeast Securities.

More than 30pc has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilise the real economy is now a bigger risk than the crisis in Greece.

"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."

World commodities prices have now been hit; copper is at a six-year low, nickel futures slid and oil fell towards $56 a barrel, a three month-low. (Reuters)

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