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.
Reuters contributed to this report.
This article was written by Tom Phillips in Beijing, for theguardian.com on Tuesday 28th July 2015 02.50 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010