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| Chinese Shares Tumble Again | Chinese Shares Tumble Again |
| (34 minutes later) | |
| HONG KONG — After several weeks of relative calm, tumult returned to China’s stock markets on Monday, casting doubt on the government’s measures to support share prices. | HONG KONG — After several weeks of relative calm, tumult returned to China’s stock markets on Monday, casting doubt on the government’s measures to support share prices. |
| The main Shanghai share index plunged 8.5 percent on Monday, its steepest one-day drop in eight years. Shenzhen’s main index fell 7 percent. | The main Shanghai share index plunged 8.5 percent on Monday, its steepest one-day drop in eight years. Shenzhen’s main index fell 7 percent. |
| Even stocks that had been strong performers in the recent, government-backed rebound were hit hard. | |
| State-owned PetroChina, the country’s biggest oil producer, fell 9.6 percent on Monday. Government-backed brokerages, which had in recent months raised billions of dollars by selling new shares, also suffered, with Citic Securities and Haitong Securities, falling by the limit of 10 percent. | |
| “The return of debacle!” China’s official Xinhua news agency said Monday on its verified Twitter account, noting that in the sell-off, about two-thirds of all mainland-listed stocks fell by the daily limit of 10 percent. | “The return of debacle!” China’s official Xinhua news agency said Monday on its verified Twitter account, noting that in the sell-off, about two-thirds of all mainland-listed stocks fell by the daily limit of 10 percent. |
| It is a turbulent time for the Chinese markets. | It is a turbulent time for the Chinese markets. |
| For more than a year, the country’s stock market soared, as investors aggressively borrowed money to buy shares. The government helped fuel the boom, touting the potential for the bull market and new companies in official news outlets, including The People’s Daily. | For more than a year, the country’s stock market soared, as investors aggressively borrowed money to buy shares. The government helped fuel the boom, touting the potential for the bull market and new companies in official news outlets, including The People’s Daily. |
| At their peak in June, the total market value of China’s publicly traded stocks briefly surpassed $10 trillion, second in size only to the United States. Tens of millions of ordinary investors opened new accounts to try to cash in on the rally. | At their peak in June, the total market value of China’s publicly traded stocks briefly surpassed $10 trillion, second in size only to the United States. Tens of millions of ordinary investors opened new accounts to try to cash in on the rally. |
| The markets started to turn in late June, with investors growing concerned about a potential bubble. Shares lost more than $3 trillion in a matter of weeks. | The markets started to turn in late June, with investors growing concerned about a potential bubble. Shares lost more than $3 trillion in a matter of weeks. |
| Worried about the fallout, the government moved aggressively to prop up stocks with a spate of measures. Authorities suspended initial public offerings, introduced a $120 billion market stabilization fund backed by the central bank, and encouraged executives to buy company shares. | Worried about the fallout, the government moved aggressively to prop up stocks with a spate of measures. Authorities suspended initial public offerings, introduced a $120 billion market stabilization fund backed by the central bank, and encouraged executives to buy company shares. |
| The moves helped restore confidence in the market. Shares, particularly in big state-backed companies, rebounded modestly. | The moves helped restore confidence in the market. Shares, particularly in big state-backed companies, rebounded modestly. |
| The renewed volatility could unsettle investors, creating additional pressure on the markets. Investors in China took out huge amounts of loans from brokerage firms in recent months to invest in stocks. With share prices now falling again, investors may be forced to unwind some of these so-called margin trades to repay what they borrowed. | |
| Analysts at the Australia and New Zealand Banking Group suggested that might be happening now, writing in a Monday evening research note that sales of shares to pay off such loans had led to the day’s heavy sell-off. “Since the securities regulator is still tightening up such activities, the stock market will continue to be very volatile despite the high-profile rescue package launched by the government in the past few weeks,” they added. | Analysts at the Australia and New Zealand Banking Group suggested that might be happening now, writing in a Monday evening research note that sales of shares to pay off such loans had led to the day’s heavy sell-off. “Since the securities regulator is still tightening up such activities, the stock market will continue to be very volatile despite the high-profile rescue package launched by the government in the past few weeks,” they added. |
| If the sell-off continues, it could also have broader ramificiations for the economy. The bull market had helped offset the slowdown in China’s traditional industrial drivers of growth. The slump could also weigh on consumer confidence, at a time when the economy is already slowing. | |
| Should the current decline persist, the government could act further to support prices. For example, Beijing could pump more money into the market, either directly or indirectly. Officials have recently signaled their willingness to continue stabilization measures. | Should the current decline persist, the government could act further to support prices. For example, Beijing could pump more money into the market, either directly or indirectly. Officials have recently signaled their willingness to continue stabilization measures. |
| Last week, the China Securities Regulatory Commission issued a denial of a report in Caijing, a respected Chinese financial news outlet, which had said the regulator was considering how to begin removing its supports for share prices. | Last week, the China Securities Regulatory Commission issued a denial of a report in Caijing, a respected Chinese financial news outlet, which had said the regulator was considering how to begin removing its supports for share prices. |
| In a July 20 statement denying the report, Zhang Xiaojun, a spokesman for the regulator, said: “The commission will continue to stabilize the market and provide reassurance, and will use all its resources working towards the goal of preventing systemic risk.” | In a July 20 statement denying the report, Zhang Xiaojun, a spokesman for the regulator, said: “The commission will continue to stabilize the market and provide reassurance, and will use all its resources working towards the goal of preventing systemic risk.” |
| Caijing promptly removed the article from its website. | Caijing promptly removed the article from its website. |