Shanghai: Shanghai stocks closed down 1.27 per cent in volatile trading today, extending days of falls despite a central bank interest rate cut aimed at supporting the flagging economy and share market. The benchmark Shanghai Composite Index fell 37.68 points to 2,927.29 on turnover of 461.8 billion yuan (USD 72.1 billion). It surged up to 4.29 per cent and was down as much as 3.85 per cent during the day. The Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 3.05 per cent, or 53.31 points, to 1,695.76 on turnover of 432.2 billion yuan. The central bank yesterday reduced interest rates and cut the amount of money banks must hold in reserve — its second such double move in two months — to try to bolster its economy and end the worst stock market rout in almost two decades.
The People’s Bank of China today followed up by injecting 140 billion yuan into the money market through its short-term liquidity operations, according to a statement. “The struggle between gains and losses suggests that the market doesn’t really know what to make of the policy move yet,” Bernard Aw, a strategist at IG Asia in Singapore, told Bloomberg News.
“There might be a chance we could see some consolidation in the markets before investors are confident enough to push higher.” Chinese stocks have lost more than 40 per cent of their value since a year-long, debt-fuelled rally collapsed in June, prompting Beijing to unleash unprecedented measures to support the market.
Its huge rescue package has included funding the China Securities Finance Corp to buy stocks on behalf of the government and barring major shareholders from selling their stakes. “The prevailing sentiment is still that investors want to cash out, whatever the government does,” Ronald Wan, chief executive at Partners Capital International in Hong Kong, told Bloomberg. “The market will remain under selling pressure for a while.”
Steelmakers were among the biggest losers in Shanghai. Hangzhou Iron and Steel plunged by its 10 percent daily limit to 6.81 yuan and Baoshan Iron and Steel fell 6.18 per cent to 5.16 yuan. Property developers also fell. Shanghai-listed Greenland Holdings slumped by its 10 per cent daily limit to 13.30 yuan, while Shenzhen-listed AVIC Real Estate Holding also lost 10 per cent to 8.96 yuan.
China’s yuan currency closed up a slight 0.03 per cent at 6.4095 against the dollar today, despite the central bank fixing the unit lower following the rate cut.