THE CHINESE STOCK MARKET OPENED A COUPLE HOURS AGO AND THE NEWS IS NOT GOOD!
China announced a flurry of new moves Wednesday to halt a stock market slide. The result? Another big dive in share prices.
The government told state companies and executives to buy shares, raised the amount of equities insurance companies can hold and promised more credit to finance trading.
Hundreds of companies have halted trading in their stock after emergency measures announced last weekend failed to stop a rout that has dragged down the benchmark Shanghai Composite Index by more than 30 percent since early June.
The Shanghai index lost another 5.9 percent on Wednesday despite the new measures and Hong Kong’s Hang Seng index closed down 5.8 percent after diving as much as 8.5 percent earlier in the day.
Greece’s debt crisis has unsettled Asian stock markets but the losses in China are driven entirely by internal factors. Beijing fostered a market boom over the past year, but with Chinese economic growth slowing, it had little basis in reality. Prices began collapsing after unrelated changes in banking regulations made investors in the rumor-fueled market suspect the government could withdraw its support. Regulators also tightened lending to stock investors, adding to their fears.
The decline in Chinese stock prices threatens to fuel political tensions and set back Communist Party plans to use financial markets to make China’s state-dominated economy more productive. The party wants to encourage stock ownership but small investors whose holdings have plunged in value say they will no longer buy shares.
Little more than a month ago, China’s stock market was the best performing in the world. The boom began after state media said last year stocks were cheap, which led investors to believe Beijing would prevent prices from falling. The Shanghai index still is up 70 percent from one year ago but novice investors who piled in just before the peak hold shares that are worth less than they paid.
Read more: HufPo