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| Chinese shares suffer further falls | Chinese shares suffer further falls |
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| Chinese shares slumped further on Tuesday before mounting a partial recovery as Beijing battled to calm the stock market turmoil that has returned to haunt the world’s second-largest economy. | Chinese shares slumped further on Tuesday before mounting a partial recovery as Beijing battled to calm the stock market turmoil that has returned to haunt the world’s second-largest economy. |
| Following Monday’s rout – when the stock exchange suffered its biggest one-day collapse since 2007 – the Shanghai Composite Index initially fell more than 4% before rebounding and closing nearly 1.7% down at 3,663.82 | Following Monday’s rout – when the stock exchange suffered its biggest one-day collapse since 2007 – the Shanghai Composite Index initially fell more than 4% before rebounding and closing nearly 1.7% down at 3,663.82 |
| The Shenzhen index closed down 2.24% at 2,111.70, after a similarly volatile day. | The Shenzhen index closed down 2.24% at 2,111.70, after a similarly volatile day. |
| Related: Shanghai investors keep calm amid the stock market storm | |
| The previous day both indices plummeted – amid fears over China’s economy and doubts about Beijing’s continuing commitment to propping up the stock market – with the Shanghai Composite down 8.5% and the Shenzhen nearly 7.6%. | The previous day both indices plummeted – amid fears over China’s economy and doubts about Beijing’s continuing commitment to propping up the stock market – with the Shanghai Composite down 8.5% and the Shenzhen nearly 7.6%. |
| Bernard Aw, a market analyst from IG, said: “Things don’t look that bad today but we need to see a few more sessions to gauge whether the sharp decline of [Monday] has reached a bottom. [Wednesday] might show a clearer picture.” | |
| Ahead of the markets opening on Tuesday, Beijing vowed to press on with efforts to tame China’s volatile stock market and prevent further panic. | |
| A state-controlled stock-buying agency would “continue to buy stocks to stabilise the market”, said Zhang Xiaojun, at China’s securities regulator, the CSRC. | |
| Related: Stock market advice for China: when in a hole, stop digging | Related: Stock market advice for China: when in a hole, stop digging |
| An editorial in the Shanghai Securities Daily, a state-run newspaper, said: “In the future the market will not fall off a cliff. The government will not allow such a situation to happen again.” | An editorial in the Shanghai Securities Daily, a state-run newspaper, said: “In the future the market will not fall off a cliff. The government will not allow such a situation to happen again.” |
| Beijing’s interventions appeared to have prevented a repeat sell-off on Tuesday with the country’s two main indexes staging partial recoveries after their initial slides. | Beijing’s interventions appeared to have prevented a repeat sell-off on Tuesday with the country’s two main indexes staging partial recoveries after their initial slides. |
| “You are seeing all these government state funds coming in to buy the blue chip companies, that will help to support the overall index,” said Aw. | “You are seeing all these government state funds coming in to buy the blue chip companies, that will help to support the overall index,” said Aw. |
| Patrick Chovanec, chief strategist at Silvercrest Asset Management in New York, said: “They have chosen this narrative of: ‘We are going to beat the market. We are going to essentially triumph over market forces.’” | Patrick Chovanec, chief strategist at Silvercrest Asset Management in New York, said: “They have chosen this narrative of: ‘We are going to beat the market. We are going to essentially triumph over market forces.’” |
| However, he said, that strategy carried serious risks for China’s Communist party leaders. | However, he said, that strategy carried serious risks for China’s Communist party leaders. |
| “Rule number one is: you don’t want to promise the unachievable,” Chovanec said. “The answer is: let the market find its level – I don’t see why they didn’t do that in the first place. In 2007 the market collapsed by 70% and it didn’t derail the Chinese economy.” | “Rule number one is: you don’t want to promise the unachievable,” Chovanec said. “The answer is: let the market find its level – I don’t see why they didn’t do that in the first place. In 2007 the market collapsed by 70% and it didn’t derail the Chinese economy.” |
| Ric Spooner, chief market analyst for CMC Markets, said Monday’s rout appeared to have been caused by Beijing withdrawing the support it had been pumping into the stock market after June’s collapse saw $3tn (£1.9tn) wiped off the value of listed companies. | Ric Spooner, chief market analyst for CMC Markets, said Monday’s rout appeared to have been caused by Beijing withdrawing the support it had been pumping into the stock market after June’s collapse saw $3tn (£1.9tn) wiped off the value of listed companies. |
| Related: China stock market hit by biggest one-day fall since 2007 | Related: China stock market hit by biggest one-day fall since 2007 |
| That move was likely to have been executed “either to test the waters to see whether the market could withstand their absence or potentially even to try and scale back on things”, Spooner said. “It appears that that didn’t work.” | |
| China’s latest stock market upset has fuelled wider concerns over the state of the country’s economy and sent the prices of commodities such as oil and copper tumbling. Prices for copper, of which China is the world’s biggest consumer, fell to a six-year low on Monday. However, it staged a slight revival on Tuesday morning, with the three-month copper price on the London Metal Exchange climbing 0.6% to $5,220 a tonne in early trading. | China’s latest stock market upset has fuelled wider concerns over the state of the country’s economy and sent the prices of commodities such as oil and copper tumbling. Prices for copper, of which China is the world’s biggest consumer, fell to a six-year low on Monday. However, it staged a slight revival on Tuesday morning, with the three-month copper price on the London Metal Exchange climbing 0.6% to $5,220 a tonne in early trading. |
| Beijing has taken unprecedented steps to stave off the threat of a more severe stock market collapse in recent weeks including freezing flotations and using a state-run “stabilisation fund” to pump billions of dollars into the market. | Beijing has taken unprecedented steps to stave off the threat of a more severe stock market collapse in recent weeks including freezing flotations and using a state-run “stabilisation fund” to pump billions of dollars into the market. |
| But analysts warn that while such interventions might work in the short-term, in the longer term they would fail. | But analysts warn that while such interventions might work in the short-term, in the longer term they would fail. |
| “To some extent these ‘circuit breaker’ initiatives can actually make these things a bit worse since they make things opaque, they mean that people become nervous,” said Spooner. | “To some extent these ‘circuit breaker’ initiatives can actually make these things a bit worse since they make things opaque, they mean that people become nervous,” said Spooner. |
| “The very fact that the authorities are acting to do things to shore the market up creates a nervousness and it is difficult for people to know where the real value is.” | “The very fact that the authorities are acting to do things to shore the market up creates a nervousness and it is difficult for people to know where the real value is.” |
| Chovanec said: “The chronic issue in China is that they want a correction without having a correction. They know that the market is out of whack. They know that a correction is necessary. They know that it is unhealthy not to have a correction. But they can’t stomach the idea of actually having a real correction. | Chovanec said: “The chronic issue in China is that they want a correction without having a correction. They know that the market is out of whack. They know that a correction is necessary. They know that it is unhealthy not to have a correction. But they can’t stomach the idea of actually having a real correction. |
| “And then, of course, the correction becomes that much more severe when it happens because it has been prevented from happening all along.” | “And then, of course, the correction becomes that much more severe when it happens because it has been prevented from happening all along.” |
| Rajiv Biswas, chief Asia economist for consultancy firm IHS Global Insight, said: “Some sort of correction had to happen and is happening and there is probably not a lot they can do to prevent a significant further drop. | Rajiv Biswas, chief Asia economist for consultancy firm IHS Global Insight, said: “Some sort of correction had to happen and is happening and there is probably not a lot they can do to prevent a significant further drop. |
| “There are a lot of different parts of the economy that are showing weakness and the collapse of the stock market is just another symptom of the fragility of the Chinese economy right now.” | “There are a lot of different parts of the economy that are showing weakness and the collapse of the stock market is just another symptom of the fragility of the Chinese economy right now.” |
| Additional research by Luna Lin | Additional research by Luna Lin |