Investors fear pullback of govt support
Chinese mainland stock markets slumped again on Tuesday, amid concerns about a possible withdrawal of supportive measures.
The benchmark Shanghai Composite Index tumbled 6.15 percent or 245.51 points to close at 3,748.16 points on Tuesday, while the Shenzhen Component Index dropped 6.56 percent or 890.04 points to 12,683.86 points.
The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen fell by 6.19 percent or 252.46 points to end at 3,825.41 points, while ChiNext, the country's NASDAQ-style board for high-tech and emerging start-ups, plunged 6.08 percent or 162.12 points to 2,504.17 points.
Nearly 1,600 stocks slumped by the 10 percent daily limit on Tuesday, while only about 20 stocks surged by 10 percent. Stocks related to nuclear power, State-owned enterprises and engineering projects suffered the most.
It was the largest one-day loss the benchmark Shanghai index had registered since July 27, when it fell by 8.48 percent.
Analysts mainly attributed the losses to sell-off pressure, as the Shanghai index had recovered to reach near the psychologically important 4,000 point mark.
"For the first time in three weeks, the Shanghai Composite Index came close to the 4,000 point level [on Monday], but lacking sufficient liquidity the index failed to stay at that level and took a heavy hit due to the significant sell-off pressure," a Shanghai-based analyst surnamed Li from GF Securities told the Global Times on Tuesday.
According to Chen Jianzhong, a Shenzhen-based analyst from BOCI Securities, Tuesday's tumble could also be a correction after the recent market recovery, which saw the Shanghai index rise by 10.23 percent over the past two weeks to close at 3,993.67 points on Monday.
"In fact, the valuations of many stocks remain high, and there are uncertainties about the market prospects, such as concerns over the possible withdrawal of government support," Li noted.
Fears have been growing that the authorities may gradually ease back from the previous support measures.
The China Securities Regulatory Commission (CSRC) said on Friday that China Securities Finance Corp (CSF) - the State-backed institution that provides financing for margin trading to brokerages and served as the main conduit for injecting rescue funding during the recent market slump - has transferred part of the shares it had purchased to China's sovereign wealth fund, Central Huijin Investment Co.
Although the CSRC said CSF may continue to play their role in stabilizing the markets in the future, this latest move was generally received as a sign that the government would gradually withdraw its support measures.
Meanwhile, Galaxy Securities, which had earlier suspended its short-selling services, resumed the business on Monday. In early August, a number of Chinese brokerages suspended their short-selling services in response to regulatory moves aimed at curbing market volatility.
Shortly after Hithink RoyalFlush Information Network Co said on Tuesday that it was investigated by the CSRC for suspected violation of certain securities and futures regulations, Hundsun Technologies Inc also issued an announcement saying that its Hangzhou branch was under regulatory investigation for the same violation.
Market sentiment was also dampened by concerns that the central government may not roll out further stimulus measures against the backdrop of a strengthening property market.
According to data released Tuesday by the National Bureau of Statistics, China's home prices rose in July for the third consecutive month, suggesting a gradual recovery in the sector.
Meanwhile, investor confidence remains relatively weak, with the latest data showing that retail investors suffered heavy losses from the previous market turmoil.
According to the monthly report from China Securities Depository and Clearing Corp, last month, the number of trading accounts worth more than 5 million yuan ($782,000) in market value decreased by 57,000, while the number of accounts with market value ranging from 100,000 yuan to 500,000 yuan declined by 869,600.
In July, the number of newly opened individual stock accounts reached 2.04 million, down by 55.89 percent compared with June's 4.64 million.
