MillenniumPost
Business

China shares sink 7.63% more, given rate cut oxygen

The benchmark Shanghai Composite Index fell 7.63 <g data-gr-id="30">per cent</g> to 2,964.97 points, following the 8.49-per cent loss in its worst daily slump since February 2007. The Shenzhen Component Index lost 7.04 per cent to close at 10,197.94 points.

Nearly 2,000 shares fell by the 10-per cent daily limit, including even Sinopec and PetroChina -- two heavyweight shares that have long acted as a kind of market ballast, 
stabilising the market in times of crisis. 

A further slide in the country’s ailing stock markets prompted the People’s Bank of China (PBOC), the central bank, to cut the reserve requirement ratio (RRR) and lower key interest rates.

From September 6, PBOC will cut the RRR for financial institutions by 50 basis points. The RRR for financial leasing companies and auto financing companies will be lowered by 300 basis points, the PBOC said in a statement. 

Benchmark interest rates will also be cut. From Wednesday, interest rates for one-year lending and deposits will be cut by 25 basis points to 4.6 per cent and 1.75 per cent respectively, the announcement said. The losing streak in China’s markets came despite the government’s decision on Sunday to allow pension funds to invest in the stock market to shore up investors’ confidence and stabilising the market.

Under the new guidelines, up to 30 <g data-gr-id="35">per cent</g> of the pension fund’s net assets can be invested in stocks and equities. The fund has assets of around 2 trillion yuan ($326.8 billion) that could be invested, meaning up to 600 billion yuan (about $100 billion) could theoretically go into the stock markets.

“The scale of the funds is limited and they will enter the stock market gradually, so their short-term impact will be quite small,” said Ren Zeping, an analyst with Guotai Junan Securities. The Caixin flash China general manufacturing PMI, the earliest available indicator of manufacturing sector conditions in China, retreated to 47.1 in August, the lowest reading since March 2009. “The continuous fall in the index in recent months indicates the economy is still bottoming out,” said He Fan, chief economist at Caixin Insight Group. 

Eighty <g data-gr-id="40">per cent</g> of China’s stock market is comprised of small investors who operate independently without <g data-gr-id="38">aid</g> of fund managers like elsewhere in the world.
The volatility of the market which started in June diluted about $four trillion worth of capital and forced about 20 million investors to leave the stock market after 
heavy losses. 

Chinese analysts generally attributed yesterday’s A-shares crash to investor disappointment with the People’s Bank of China (PBC), the country’s central bank, after it failed to announce an expected cut 
on the banks’ reserve requirement ratio (RRR) over the weekend.

Japan’s Nikkei 225 down 4%
Japan is ready to “take appropriate measures,” if necessary, to quell volatility in the financial markets, a top government spokesman said on Tuesday. Chief Cabinet Secretary Yoshihide Suga told reporters that Japan’s economy, the world’s third-largest, is still “on track for a moderate recovery,” despite the roller-coaster market gyrations of recent weeks. 

But Suga acknowledged that recent swings in share prices and foreign exchange markets have taken a toll. “What is important is to be alert to developments at home and abroad,” said Suga, who added that Japan was prepared to work with other major industrial nations to handle the global market declines. “If necessary, we are going to take appropriate measures,” Suga said, without giving any details.
Next Story
Share it