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31-07-2015, 06:59 PM
Chinese shares have worst month since June 2013
CHAO DENG DOW JONES JULY 31, 2015 6:08PM
China’s main stock index was today down 13 per cent in the month to date. Source: AFP
China shares finished their worst month in over two years after confidence in a government-led recovery wavered.
Shanghai shares closed down 1.13 per cent on today, after the market regulator announced a crackdown on computerised program selling that it blamed for recent volatility, dealers said.
The benchmark Shanghai Composite Index dropped 42.04 points to 3663.73 on turnover of 460.5 billion ($US75.3 billion). The index slumped 10 per cent over the week and 13 per cent for the month.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 0.82 per cent, or 17.54 points, to 2110.62 on turnover of 417.6 billion yuan. It tumbled 9.13 per cent from last Friday’s close.
That makes Shanghai one of the worst-performing indexes globally this month.
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Amid the ongoing instability, China’s securities regulator today announced it had launched a probe into automated trading and restricted 24 stock accounts suspected of “influencing securities trading prices,” according to its official website. The investigation seeks to root out possible causes of the recent volatility that has rattled China’s stock market.
Automated trading, which the regulator said had amplified “big fluctuations” on the market, typically involves transactions carried out by computer at high speed on a large number of stocks.
The Shanghai and Shenzhen exchanges had put limits on 24 accounts, without naming the account holders or detailing the restrictions.
The CSRC has already announced probes into “malicious” short-selling — a bet prices will go lower — and what it called “concentrated” selling, which caused an 8.5 per cent plunge in the Shanghai market on Monday, the biggest one-day fall in eight years.
Other moves by authorities in the wake of the falls — which began last month — include banning shareholders with more than 5 per cent stakes from selling stock and funding the state-backed China Securities Finance to buy shares.
China shares have been reeling since Monday’s 8.5 per cent loss, the biggest daily decline in more than eight years, when investors dashed for the exits on worries that government-backed funds might wind down market support.
Shanghai is down 28 per cent since its peak in mid-June, despite fresh rhetoric from the securities regulator that it wouldn’t pull away from buying shares.
The index has rebounded by about just 4 per cent since the deepest point of the sell-off on July 8.
Fluctuating confidence about the government’s role in the market has led to wild intraday swings in recent days. While that’s spooked some investors, others have seen an opportunity to chase short-lived surges while the government appears to be buying in.
“The game between speculative funds and state funds adds to volatility on the market,” said Miller Zhao, analyst at Trade Blazer, a Shanghai-based private-equity firm. “To put in plain language, speculative investors want to take profits from government-backed funds.”
Analysts warned of further volatility in the afternoon trade ahead of Chinese official manufacturing data tomorrow. An early gauge of manufacturing last week could throw doubt on the health state-owned enterprises, according to analysts at IG. “This question might see negative trading in the afternoon as investors close out positions to mitigate that possible risk,” wrote IG analyst Evan Lucas in a note.
Fears that China’s sell-off could spiral beyond the domestic equities market has unsettled the rest of the Asia region in recent weeks. Investors have withdrawn $US12.1 billion from emerging-market Asian equity funds in the last three weeks ending July 29, the largest three-week outflow in more than a decade, according to ANZ Research and EPFR Global, a fund data provider. The withdrawals also come as investors prepare for the Federal Reserve to raise interest rates in the US later this year.
Some $US1.8 billion of that outflow has come from China, which has suffered its deepest market sell-off since the global financial crisis.
Signs of a deepening slowdown in China also have pushed currencies in Asia to multiyear lows this month. Currencies are down, on average, 2 per cent for the month against the US dollar, while the Australian dollar has fallen over 5 per cent over that period and New Zealand’s dollar is down 2.8 per cent.
“(A) n emerging market sell-off will likely be the main theme in (the second half), as the Fed prepares to normalise when China soft lands,” said Stephen Jen, managing partner at London-based hedge fund SLJ Macro Partners. “There is very little that the emerging-market countries can do to avert a further sharp sell-off in their currencies.”
Declines in currencies, in part driven by sluggish global demand and a broadly stronger US dollar, have failed to give a boost to exports. Last week, China signalled it would allow its currency to move more freely, by widening the yuan’s trading ban, another factor pressuring the region’s economies as Chinese goods could become more competitive.
Commodities are another casualty of a stronger US dollar and expectations of a rate increase. Many materials are priced in the currency, making them more expensive for foreign buyers as the dollar strengthens. Higher interest rates in the U.S. also give investors incentive to shift to other assets, as commodities don’t provide any income and cost money to hold.
Gold has sank to five-year lows, and is currently trading down 0.4 per cent at $US1083.70 a troy ounce in Asia.
Concerns about oversupply and weak demand in China, one of the world’s biggest commodities consumers, have weighed on oil prices in recent months, too. Brent crude, the global oil benchmark, is down 21 cents to $US53.10 in Asian trade, ahead of a US government supply report on Friday in the US.
Stocks elsewhere in the region were mixed, with the Nikkei Stock Average flat, as disappointing consumer-spending data offset a better-than-expected inflation reading.
Dow Jones
CHAO DENG DOW JONES JULY 31, 2015 6:08PM
China’s main stock index was today down 13 per cent in the month to date. Source: AFP
China shares finished their worst month in over two years after confidence in a government-led recovery wavered.
Shanghai shares closed down 1.13 per cent on today, after the market regulator announced a crackdown on computerised program selling that it blamed for recent volatility, dealers said.
The benchmark Shanghai Composite Index dropped 42.04 points to 3663.73 on turnover of 460.5 billion ($US75.3 billion). The index slumped 10 per cent over the week and 13 per cent for the month.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 0.82 per cent, or 17.54 points, to 2110.62 on turnover of 417.6 billion yuan. It tumbled 9.13 per cent from last Friday’s close.
That makes Shanghai one of the worst-performing indexes globally this month.
Start of sidebar. Skip to end of sidebar.
MOREWhy China’s markets swing late
End of sidebar. Return to start of sidebar.
Amid the ongoing instability, China’s securities regulator today announced it had launched a probe into automated trading and restricted 24 stock accounts suspected of “influencing securities trading prices,” according to its official website. The investigation seeks to root out possible causes of the recent volatility that has rattled China’s stock market.
Automated trading, which the regulator said had amplified “big fluctuations” on the market, typically involves transactions carried out by computer at high speed on a large number of stocks.
The Shanghai and Shenzhen exchanges had put limits on 24 accounts, without naming the account holders or detailing the restrictions.
The CSRC has already announced probes into “malicious” short-selling — a bet prices will go lower — and what it called “concentrated” selling, which caused an 8.5 per cent plunge in the Shanghai market on Monday, the biggest one-day fall in eight years.
Other moves by authorities in the wake of the falls — which began last month — include banning shareholders with more than 5 per cent stakes from selling stock and funding the state-backed China Securities Finance to buy shares.
China shares have been reeling since Monday’s 8.5 per cent loss, the biggest daily decline in more than eight years, when investors dashed for the exits on worries that government-backed funds might wind down market support.
Shanghai is down 28 per cent since its peak in mid-June, despite fresh rhetoric from the securities regulator that it wouldn’t pull away from buying shares.
The index has rebounded by about just 4 per cent since the deepest point of the sell-off on July 8.
Fluctuating confidence about the government’s role in the market has led to wild intraday swings in recent days. While that’s spooked some investors, others have seen an opportunity to chase short-lived surges while the government appears to be buying in.
“The game between speculative funds and state funds adds to volatility on the market,” said Miller Zhao, analyst at Trade Blazer, a Shanghai-based private-equity firm. “To put in plain language, speculative investors want to take profits from government-backed funds.”
Analysts warned of further volatility in the afternoon trade ahead of Chinese official manufacturing data tomorrow. An early gauge of manufacturing last week could throw doubt on the health state-owned enterprises, according to analysts at IG. “This question might see negative trading in the afternoon as investors close out positions to mitigate that possible risk,” wrote IG analyst Evan Lucas in a note.
Fears that China’s sell-off could spiral beyond the domestic equities market has unsettled the rest of the Asia region in recent weeks. Investors have withdrawn $US12.1 billion from emerging-market Asian equity funds in the last three weeks ending July 29, the largest three-week outflow in more than a decade, according to ANZ Research and EPFR Global, a fund data provider. The withdrawals also come as investors prepare for the Federal Reserve to raise interest rates in the US later this year.
Some $US1.8 billion of that outflow has come from China, which has suffered its deepest market sell-off since the global financial crisis.
Signs of a deepening slowdown in China also have pushed currencies in Asia to multiyear lows this month. Currencies are down, on average, 2 per cent for the month against the US dollar, while the Australian dollar has fallen over 5 per cent over that period and New Zealand’s dollar is down 2.8 per cent.
“(A) n emerging market sell-off will likely be the main theme in (the second half), as the Fed prepares to normalise when China soft lands,” said Stephen Jen, managing partner at London-based hedge fund SLJ Macro Partners. “There is very little that the emerging-market countries can do to avert a further sharp sell-off in their currencies.”
Declines in currencies, in part driven by sluggish global demand and a broadly stronger US dollar, have failed to give a boost to exports. Last week, China signalled it would allow its currency to move more freely, by widening the yuan’s trading ban, another factor pressuring the region’s economies as Chinese goods could become more competitive.
Commodities are another casualty of a stronger US dollar and expectations of a rate increase. Many materials are priced in the currency, making them more expensive for foreign buyers as the dollar strengthens. Higher interest rates in the U.S. also give investors incentive to shift to other assets, as commodities don’t provide any income and cost money to hold.
Gold has sank to five-year lows, and is currently trading down 0.4 per cent at $US1083.70 a troy ounce in Asia.
Concerns about oversupply and weak demand in China, one of the world’s biggest commodities consumers, have weighed on oil prices in recent months, too. Brent crude, the global oil benchmark, is down 21 cents to $US53.10 in Asian trade, ahead of a US government supply report on Friday in the US.
Stocks elsewhere in the region were mixed, with the Nikkei Stock Average flat, as disappointing consumer-spending data offset a better-than-expected inflation reading.
Dow Jones