- Title: MARKETS-CHINA/OPEN China shares gyrate as Beijing scrambles to calm markets
- Date: 28th July 2015
- Summary: SHANGHAI, CHINA (JULY 28, 2015) (REUTERS) PEARL TOWER TO LUJIAZUI FINANCIAL DISTRICT VARIOUS OF ELECTRONIC TICKER BOARD SHOWING SHANGHAI COMPOSITE INDEX AND SHENZHEN COMPOSITE INDEX HONG KONG, CHINA (JULY 28, 2015) (REUTERS) INVESTMENT STRATEGIST AT PRIVATE CAPITAL LTD, ENZIO VON PFEIL, TALKING TO JOURNALIST VON PFEIL'S HANDS (SOUNDBITE) (English) INVESTMENT STRATEGIST AT PRIVATE CAPITAL LTD, ENZIO VON PFEIL, SAYING: "The more that you lend on a margin account, the more that the bank lends a person then the less the stock market needs to fall to trigger a margin call and so even if the market doesn't fall very much, if you've borrowed six to eight times then the market only needs to fall five to seven percent for that margin call to become activated and that's what I think happened, it's not the economic news." VON PFEIL'S FACE (SOUNDBITE) (English) INVESTMENT STRATEGIST AT PRIVATE CAPITAL LTD, ENZIO VON PFEIL, SAYING: "I think they will sadly not tighten up on the margin lending, I think they will probably cut rates yet again, they will inject more money into the system, but they won't do what is needed to fight this market terrorism which is to really contain the margin lending itself and that's why they are going to be breeding the grounds for the next market rout." SHANGHAI, CHINA (JULY 28, 2015) (REUTERS) INVESTORS INSIDE A STOCK EXCHANGE VARIOUS OF STOCK INFORMATION ON SCREEN (SOUNDBITE) (Mandarin) A 50-YEAR-OLD INVESTOR, SURNAMED WANG, SAYING: "The market is dead. The government should have told the public they were planning to save the market. If you have difficulties, you should tell the public. Don't tell us some slogans like 'We have the ability. We have confidence. We have (the right) conditions.' It's just cheating us common people. These slogans should be quickly followed by detailed methods. The market dropped so much yesterday but I didn't see any official news on media. It's a trick to cheat the people." 65-YEAR-OLD INVESTOR, SURNAMED XU, ON COMPUTER STOCK INFORMATION ON SCREEN (SOUNDBITE) (Mandarin) A 65-YEAR-OLD INVESTOR, SURNAMED XU, SAYING: "I'm not optimistic. I'm tied up and cannot liquidate my assets (due to the losses). Most of my capital is tied up. How can recoup (my investments)? But I have a good state of mind and I won't commit suicide." INVESTORS INSIDE A STOCK EXCHANGE VARIOUS OF ELECTRONIC TICKER BOARD SHOWING SHANGHAI COMPOSITE INDEX AND SHENZHEN COMPONENT INDEX ON OVERPASS
- Embargoed: 12th August 2015 13:00
- Keywords:
- Location: China
- Country: China
- Topics: General
- Reuters ID: LVA7P6IKO0UXR38FTZSLTGDCX2CF
- Aspect Ratio: 16:9
- Story Text: Chinese shares sank more than 3 percent on Tuesday (July 28), as Beijing scrambled once again to stabilise a stock market whose wild gyrations have heightened fears about the financial stability of the world's second biggest economy.
After a plunge of more than 8 percent in major indexes on Monday (July 27), Chinese regulators said they were prepared to buy shares to stabilise the stock market, while the central bank injected cash into money markets and hinted at further monetary easing.
The CSI300 index fell 0.2 percent, to 3,810.65 points at the end of the morning session, while the Shanghai Composite Index lost 1.0 percent, to 3,688.48 points. The indexes were down 5 percent earlier.
Monday's dramatic slide shattered three weeks of relative calm for Chinese equities, secured through heavy government intervention in which authorities pumped liquidity into the market while effectively barring many investors from selling.
Enzio Von Pfeil, an investment strategist at Private Capital Ltd said he believed the main reason behind the scale of Monday's losses was due to the extent to which credit, or margin lending, is now propping up the market.
"The more that you lend on a margin account, the more that the bank lends a person then the less the stock market needs to fall to trigger a margin call and so even if the market doesn't fall very much, if you've borrowed six to eight times then the market only needs to fall five to seven percent for that margin call to become activated and that's what I think happened, it's not the economic news," he said, adding that he was not optimistic that the government had the will to tamp down on margin trades.
"I think they will sadly not tighten up on the margin lending, I think they will probably cut rates yet again, they will inject more money into the system, but they won't do what is needed to fight this market terrorism which is to really contain the margin lending itself and that's why they are going to be breeding the grounds for the next market rout."
However, other analysts believe the rapid sell-off, which saw China's major indexes suffer their biggest one-day loss in more than eight years, may have been partly due to authorities testing the water for withdrawing some of that heavy-handed support.
Three people in the banking industry with direct knowledge told Reuters on Monday that the state-run margin lender had returned ahead of schedule some of the funds it borrowed from commercial banks to stabilise the stock market.
Many retail investors were pessimistic about the chances of a market recovery any time soon.
"The market is dead. The government should have told the public they were planning to save the market. If you have difficulties, you should tell the public. Don't tell us some slogans like 'We have the ability. We have confidence. We have (the right) conditions.' It's just cheating us common people. These slogans should be quickly followed by detailed methods. The market dropped so much yesterday but I didn't see any official news on media. It's a trick to cheat the people," said 50-year-old investor Wang.
Xu, a 65-year-old investor, said that, having sunk most of her assets into the market, she now felt stuck.
"I'm not optimistic. I'm tied up and cannot liquidate my assets (due to the losses). Most of my capital is tied up. How can recoup (my investments)? But I have a good state of mind and I won't commit suicide," she said.
The People's Bank of China said on Tuesday it would inject 50 billion yuan ($8.05 billion) into money markets in its biggest liquidity boost since July 7, near the trough of the last market sell-off.
The central bank also said, in a statement before the stock market opened, that it would use "various monetary tools" to maintain "appropriate levels of liquidity", a signal that the further monetary easing that many analysts have predicted could be in store.
China's main stock indexes had more than doubled over the year to mid-June, when a sudden swoon saw shares lose more than 30 percent of their value in a matter of weeks.
Markets finally began stabilising again in the second week of July after a barrage of official support measures.
China's central bank cut interest rates, brokerages formed stabilisation funds and regulators lifted restrictions on pensions and insurers investing in stocks, an implied combined total verbal commitment of almost $800 billion.
Beijing also cracked down on "malicious" short-sellers in the futures market, froze IPOs to prevent a liquidity drain and looked the other way as around 40 percent of companies suspended trading in their shares to escape the rout. - Copyright Holder: REUTERS
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