China's stock market remains jittery after greatest losses since 2007 / GUARDIAN

Stock market advice for China: when in a hole, stop digging

With ham-fisted interventions, Beijing has turned the stock market into a giant game of guessing how long its props will last. But it is unlikely to change tack

Even by recent Chinese standards, the latest stock market plunge was spectacular. Nearly 1,800 stocks – or more than 60% of shares on the main markets in Shanghai and Shenzhen – fell by the daily limit of 10%, thereby triggering a trading suspension. If such a limit had not been in operation, who knows where prices might have settled. An 8.5% overall fall in the Shanghai Composite might have been 18.5% or 28.5%. Almost any guess is credible.

Beijing's desperate attempts to control the stock market will end badly

Nils Pratley /

Monday 27 July 2015 20.02 BST / http://www.theguardian.com/world/nils-pratley-on-finance/2015/jul/27/stock-market-china-analysis-nils-pratley

What was the trigger? The question misses the point. By intervening in the market in various ham-fisted ways – forcing state funds to buy shares, banning sales by big investors, pumping cheap loans into broking firms – Beijing has turned its stock market into a giant game of guessing how long such artificial props can be maintained.

Sooner or later, a big fall was bound to arrive because everybody knows – or should know – that valuations remain absurdly high. The Shanghai market, after all, is still up 70% year-on-year and is still stuffed with companies valued at 40-plus times earnings.

For the past three weeks, the Beijing authorities might have kidded themselves they had stopped the rot. The Shanghai Composite had bounced 17% from its low point at the beginning of the month. But half of that gain evaporated in a single trading session on Monday, demonstrating that fear in stock markets cannot be eradicated on the orders of Beijing.

It’s hard to know what the authorities will try next. Two limit-down days in a row would be an embarrassing demonstration of Beijing’s loss of control of events. But summoning heavier armoury, in the form of larger state-sponsored buying of stocks, would bring greater problems around the corner. Equally, another cut in interest rates would probably be counter-productive; foreign investors would conclude that monetary policy is being set for the stock market rather than for the real economy.

When in a hole, the traditional advice is stop digging. It’s a sound principle, and one Beijing will probably ignore.

China's stock market remains jittery after greatest losses since 2007

Beijing vows to buy stocks to prop up stock market, regulator says, as shares slump then rise after Monday’s frenzied selling

An investor watches market returns at a stock exchange hall on 27 July in Tai an, China.

Tom Phillips in Beijing

Tuesday 28 July 2015 02.50 BST / http://www.theguardian.com/business/2015/jul/28/beijing-prop-up-china-stock-market-losses

Beijing has vowed to step up its interventions in China’s volatile stock market following a traumatic day on Monday when stocks suffered their greatest losses since 2007.

A government-controlled stock-buying agency would “continue to buy stocks to stabilise the market”, said Zhang Xiaojun, a spokesperson with China’s security’s regulator, the CSRC.

The regulator was also now investigating “huge stock sell-offs by some individuals and will punish any malicious short selling”, Zhang added, according to Xinhua, Beijing’s official news agency.

Asian stocks fell to three-week lows on Tuesday morning, as a deepening rout in Chinese stocks erased risk appetite – sending investors flocking to safe-haven instruments such as government bonds and the Japanese yen.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8% in early deals, its lowest level since 9 July, as mainland Chinese indexes opened 2% to 5% lower.

Tokyo’s Nikkei fell more than 1%, with a strong yen accelerating the decline. Australian shares fell 0.9% and South Korea’s Kospi shed 1%.

Despite the government’s pledge to continue propping up the stock market, analysts warned those measures were not succeeding in boosting confidence.

Rajiv Biswas, the chief Asia economist for IHS Global Insight, said: “Some sort of correction had to happen and is happening and there is probably not a lot they can do to prevent a significant further drop.

“Even if they do announce monetary stimulus and fiscal stimulus measures, it is going to take some time before those really have any impact on the economy,” Biswas added.

“There are a lot of different parts of the economy that are showing weakness and the collapse of the stock market is just another symptom of the fragility of the Chinese economy right now.”

Following three weeks of relative calm, the Shanghai Composite Index plummeted on Monday, ending down 8.5% at 3725.56 – its worst fall since February 2007. Meanwhile the Shenzhen index dropped nearly 7.6% to close at 12493.05 points.

The latest day of frenzied selling – which analysts said reflected weaker economic data out of China as well as a lack of confidence in Beijing’s response to ongoing stock market chaos – was a slap in the face for the country’s Communist party leaders. Beijing launched an unprecedented push to prop up the country’s stock market after a collapse that began in mid-June saw more than $3tn wiped off the value of listed companies.

Until Monday, those efforts, which also included freezing IPOs, appeared to have brought some measure of stability.

Reuters contributed to this report.