China attempts to stop a market crash as shares depict wild trading
On Thursday, China stocks depicted a wild trading trend following the announcement by regulators that new measures have been designed to stop the slide of the market- http://money.cnn.com/2015/07/08/investing/china-stock-market-crash/index.html (follow the link for more information). While opening, there was a drop of the Shanghai Composite to 3 percent but this reversed course moving to a positive position. However, the index was unable to hold onto an upward momentum. After an hour, it took a flat trend for almost an hour and thirty minutes of trading.
The Hang Seng for Hong Kong and Shenzhen Composite fared better recording gains of about 2 percent despite having a slow start. So far, the loss recorded by Shanghai Composite from June 12 is an unnerving 32 percent. Shenzhen market compares to the Nasdaq index of America and it has more technology companies but it has also been down throughout this period with over 40 percent.
The state media has reported that over half of the companies that trade in China stocks are considering pulling shares due to the continued roller-coaster ride of the markets. On Thursday, over 100 companies announced that they would halt their trading.
Meanwhile the government is doing everything possible to recue China markets. The securities regulator announced drastic measures which included banning the shareholders that are worth over 5 percent stakes from selling their shares within six months. This drastic move is aimed at halting a plunge of the stock prices since they are beginning to roil the financial markets globally- http://www.theguardian.com/world/2015/jul/09/china-bans-major-shareholders-from-selling-their-stakes-for-next-six-months (follow the link for more information).
Nevertheless, despite barring major investors from trading their stocks in order to boost the currently flagging market, the Shanghai Composite went down 3.6 percent even with the aggressive measures being put in place. In the last month alone, there has been over 30 percent loss in the value of the Chinese shares.
The China Banking Regulatory Commission (CBRC) announced on Thursday that it would let financial institutions renegotiate the maturity terms of lending and acceptance of stocks collateral. The renegotiations would also consider allowing banks to ease the requirements’ margin for borrowers.
The inflation data of China for June had little boost on investors’ sentiments. The consumer inflation pace is quickening to 14 percent from 1.3 percent last year and this is beating the expectations that investors hold for the market.
The downfall spreads to the Asian shares
The downfall of the shares of the mainland China has raised concerns among the investors in Asian equities which have extended losses due to concerns over the market turmoil in China. The broadest index of the Asia-Pacific shares has shown a 0.2 percent hovering outside Japan.
Nikkei 225 index for Japan went down to 2.2 percent to 19,299.67 since investors were buying yen due to their concerns over the stock market of China and worries about the future of Greece within eurozone- http://www.bbc.com/news/business-33456768 (follow the link for more information). Generally, investors are investing in yen because they consider it a safe bet during the current turmoil and uncertainty. Dollar was almost hitting a 7-week low against the yen. However, when yen becomes stronger it erodes the overseas earnings for Japanese exporters.
The theory behind the current Chinese stock bubble is that the economic growth of this country is at the weakest point it has been from 2009. Share prices went ahead of economic growth and profits made by companies which are lower than they were last year.