July 08, 2015

“If you hadn’t been greedy you have nothing to fear now. We are heading to 2,500.”

Bloomberg China’s benchmark stock index fell to a three-month low on concern a raft of measures to stabilize equities is failing to stop the bear-market rout as traders unwind margin bets at a record pace.

'The Shanghai Composite Index slid 3.9 percent to 3,582.50 at the 11:30 a.m. break, after plunging as much as 8.2 percent, the most since 2007. Power, health-care and consumer companies led declines, as only 14 stocks among the 1,106 that trade in Shanghai rose. PetroChina Co. and Industrial & Commercial Bank of China Ltd., the two biggest stocks, lost more than 3 percent.

'The latest attempts to stem declines, which include a wave of Chinese companies halting trading in their shares and regulators unveiling measures to prop up the value of small-cap stocks, have so far failed to convince investors that valuations are cheap enough after a 28 percent drop in the Shanghai Composite from this year’s high on June 12. The measures follow stock purchases by state-directed funds and interest-rate cuts by the central bank in recent weeks.

'“Greed and fear,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “If you hadn’t been greedy you have nothing to fear now. We are heading to 2,500.”

'The CSI 300 dropped 4.8 percent. Hong Kong’s Hang Seng China Enterprises Index, which entered a bear market Tuesday, fell 5.2 percent at 11:55 a.m., dragged down by losses for banks and brokerages. The Hang Seng Index dropped 4.2 percent.

'Traders cut 98.3 billion yuan ($15.8 billion) worth of shareholdings purchased with borrowed money on the Shanghai exchange on Tuesday, an 8.5 percent drop from the previous day that’s the biggest on record. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150 percent gain in the 12 months through June 12.'

No comments: