Chinese Stock Markets Crash One More Time And Extend Biggest Losses Since 1996

“Chinese shares plummeted to extend the steepest four-day rout since 1996 on concern the government is abandoning market support measures,” Bloomberg reports.

According to the news agency:

The Shanghai Composite Index tumbled 7.6 percent to 2,964.97 at the close, sinking below the 3,000 level for the first time in eight months. The gauge has dropped 22 percent in four days since Aug. 19. More than 700 stocks fell by the 10 percent daily limit in Shanghai on Tuesday, including PetroChina Co., the nation’s biggest company by value.

Speculation around the government’s intentions has escalated since Aug. 14, after China’s securities regulator signaled authorities will pare back the campaign to prop up share prices as volatility falls. The China Securities Regulatory Commission made no attempt to reassure investors after Monday’s plunge, unlike a month ago when officials issued two statements shortly after an 8.5 percent drop.

Wei Wei, an analyst at Huaxi Securities in Shanghai, told Bloomberg News the following:

It’s panic selling and an issue of confidence (…)

The government won’t step in to rescue the market again, as it’s a global selloff and it’s spreading everywhere now. It’s not going to work this time.

Zhou Lin, an analyst at Huatai Securities thinks that:

Global investors are cannibalising each other. Calling it a market disaster is not an overstatement (…)

The mood of panic is dominating the market … And I don’t see any signs of meaningful government intervention.

After the turmoil in China rocked world equity and commodity markets on Monday, policymakers elsewhere in Asia sought to soothe fears about the broader impact on the global economy, Reuters reports.

It is not unusual to see stock market corrections. It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in other stock markets, but the fundamentals are sound,

said Australian Prime Minister Tony Abbott, whose country is heavily exposed to China.

Today, Tokyo’s Nikkei index closed 4% down while other Asian markets managed to recover after Monday’s collapse. Hong Kong’s Hang Seng closed under 1% higher. Taiwan’s TSEC 50 Index, closed 3.58% up.

According to RT:

In the past, China’s central bank has regularly intervened in an effort to revive markets. The People’s Bank of China has spent more than $200 billion buying Chinese stocks since early July.

In August, it prohibited traders from borrowing and repaying stocks on the same day, making it difficult to benefit from hourly price fluctuations in the stumbling market. The state-run China Securities Regulatory Commission (CSRC) announced in July that any shareholder with more than a 5 percent stake in any Shanghai- or Shenzhen-listed company, including foreign investors, should not reduce its holdings over the next six months.

A rout in emerging market (EM) stocks and currencies has deepened amid a series of devaluation events, oil prices at a six-year low and continuing to plunge amid a global glut, concerns about the U.S. Fed hiking interest rates, and growth concerns in China.

The MSCI Emerging Markets Index, a benchmark for emerging market equities, fell 2.2 percent on Friday to total a 6 percent decline last week, the worst weekly decline since May 2012.  The index closed at 812.384 on Friday, which is the lowest level since July 2009.

Furthermore commodity prices have also taken a beating, as Bloomberg reported on Friday that its Commodity Index has fallen to the lowest level since 2002, while oil had the longest run of weekly declines in almost 30 years.