Greece Still Weighs on Markets as China Stocks See-Saw Again

29 May 2015 | Author: | No comments yet »

China stocks volatile, end mixed after previous day’s tumble.

The Chinese equities market have been the world’s best performer this year, but millions of investors have learnt the hard way this week that bull runs do not last forever. NEW YORK (AP) — U.S. stocks are opening slightly lower after the government reported that the domestic economy contracted in the first three months of the year.

Shanghai: China’s main stock market indexes ended a volatile Friday just about where they started it after the previous day’s sharp sell-off that led many to believe the red-hot bull market has paused for a correction. After a rough start in which the Shanghai Composite Index briefly slid more than 4 per cent, key indexes recovered to bounce in and out of positive territory, and they ended the day mixed. The sell-off on Thursday, which saw turnover in Shanghai set a record at 1.2 trillion yuan ($193.51 billion), was set off by multiple factors, including margin finance tightening moves by brokerages, a central bank move to drain market liquidity and a coming flood of initial public offerings (IPOs). Shanghai stocks still remain up 43 per cent this year and 133.48 per cent over the past 12 months, while the smaller Shenzhen market is up 122 per cent.

David Dai, Shanghai-based investment director at Nanhai Fund Management Co Ltd, said they are all excuses for investors to take profit after the market rose “too much and too fast.” “The correction is not yet over,” Dai said. “Yesterday’s slump was too rapid, so many investors didn’t have time to flee. Before Thursday’s sell-off, the markets had risen in the previous seven sessions and turnover had reached a record daily 2.42 trillion yuan ($509 billion). Many are still seeking exit.” In additional signs of investor caution, Chinese fund managers cut the proportion of their portfolios to be invested in stocks over the next three months on correction concerns, a Reuters poll showed. The Shanghai market was marching towards the 5000 mark, the highest since the global financial crisis emerged in 2008, when news spread that two brokerages, Guosen Securities and Southwest Securities, were tightening margin lending. It is estimated 100,000 new securities trading accounts are opened around the country each day, meaning more Chinese are involved in the equities markets than ever before.

China is keen to show the world it is embracing the free market concept, and a depressed equities market is the last thing a country as tightly controlled as China wants. It hyped up China’s economic foundations and reinforced that regulators had the situation under control. “With analysts loudly advising against panic, they cry that short-term volatility does not alter a long-term run supported by economic restructuring and new growth potential,” it said. “New growth engines, a consumer-led marketplace, industrial co-operation overseas, and business-friendly reforms have combined to leave China well placed to cope with the slowdown.” The timing of the Xinhua piece, late on Thursday night, was curious and certainly a sign that policy makers do not want investors to panic. A version of the editorial was published in dozens of Chinese-language publications in a bid to calm nerves. “A remarkable feature of this bull market is leverage.

The positive tone in the market is automatically transformed into a negative one.” “The market is different with the past because we have never seen such a large amount of leverage.

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