Shanghai stocks fall again. Limit losses with government support
The blue-chip CSI300 index closed down 0.7% after falling as much as 2.1%, close to the level it last reached in 2019. The Shanghai Composite Index fell 1%, recording its sixth consecutive decline.
Last week, the Shanghai benchmark recorded its worst week since October 2018, leading many Chinese investors to vent their frustration and anger on social media, including the US Embassy in Beijing’s blog account.
In an apparent effort to calm markets, China’s securities regulator vowed last weekend to prevent unusual market movements and crack down on “vicious” short-selling. On Monday, the watchdog said it would take strong action to prevent the risk of margin calls.
“The national team must step up efforts to save the market,” said Yang Delong, chief economist at First Seafront Fund Management. “The market has reached a critical moment.”
Government-backed investors, known as the ‘national team’, have stepped up purchases of blue-chip funds in recent weeks to support the market, and there were signs on Monday that state-owned companies are buying small-cap stocks that have recently fallen. Trading volume for exchange-traded funds that track small-cap indices such as the CSI500, CSI1000 and ChiNext surged on Monday. Still, the CSI 1000 index fell 6% on Monday, while the CSI500 index fell 2.3%, driven by ongoing concerns that many investors may have to liquidate leveraged bets.
Adding to investors’ pessimism, recent economic indicators have shown no signs of improvement, and on Friday the International Monetary Fund (IMF) predicted that China’s economic growth rate will slow to 4.6% in 2024 and fall further in the medium term, to around 3.5% in 2028. We expected it to grow. .
The Hong Kong market remained relatively stable, with the Hang Seng benchmark down 0.2%. Asian shares fell after a solid U.S. jobs report dashed expectations of a short-term interest rate cut from the Federal Reserve.
Geopolitical concerns also weighed on markets, with the United States adding more than a dozen Chinese companies to the list of companies it says are working with the Chinese military as part of a broader effort to block American technology that aids China.
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