China's tumbling
stock market showed signs of seizing up on Wednesday, as companies
scrambled to escape the rout by having their shares suspended and
indexes plunged after the securities regulator warned of "panic
sentiment" gripping investors.
Beijing,
which has struggled for more than a week to bend the market to its
will, unveiled yet another battery of measures to arrest the sell-off,
and the People's Bank of China said it would step up support to
brokerages enlisted to prop up shares.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen close down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.
With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares could find a buyer, blue chips that had been supported by stabilization funds earlier in the week bore the brunt.
"I've
never seen this kind of slump before. I don't think anyone has.
Liquidity is totally depleted," said Du Changchun, an analyst at
Northeast Securities.
"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."
More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.
"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."
More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges on Wednesday, taking total suspensions to about 1,300 - 45 percent of the market or roughly $2.4 trillion worth of stock - as companies scuttled to sit out the carnage.
With so many small-cap companies sheltering on the sidelines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a modest 0.8 percent.
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The CSI300 index of the largest listed companies in Shanghai and Shenzhen close down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.
With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares could find a buyer, blue chips that had been supported by stabilization funds earlier in the week bore the brunt.
"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."
More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.
"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."
More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges on Wednesday, taking total suspensions to about 1,300 - 45 percent of the market or roughly $2.4 trillion worth of stock - as companies scuttled to sit out the carnage.
With so many small-cap companies sheltering on the sidelines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a modest 0.8 percent.
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