China stocks’ worst day in nearly three weeks after punishments

 
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hinese equities tumbled again on Monday, with smaller stocks falling nearly 7 per cent after the securities regulator announced punishments of individuals for market manipulation.

The benchmark Shanghai Composite shed 2.7 per cent and the small-cap focused Shenzhen Composite fell 6.7 per cent. For both indices it was the worst session since August 25.

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The share price falls came as a long-awaited plan to overhaul China’s bloated state-owned enterprises (SOEs) was met with disappointment by investors.

Shares in many of the SOEs that were expected to benefit from the plan had risen over the past year, and when it turned out to be less far-reaching than many hoped, investors seized the moment to lock in profits.

Monday’s share price falls also came amid growing concern among foreign investors that China’s slowdown is worse than previously thought, and mounting disquiet that measures taken by the Beijing authorities to stabilise the stock market and revive the broader economy are failing.

There was more bad news over the weekend, as data released on Sunday showed fixed-asset investment for the year to date through August posting the slowest rate of growth for 15 years. Factory output growth also remained near its weakest level in a decade.
The government’s plan aims to make SOEs more efficient and competitive without relying on outright privatisation. But analysts say it is doubtful whether incremental changes, such as selling minority stakes and changing the way directors and executives are appointed, will be enough to reshape the state sector.

Stock market losses were even steeper by late trade on Monday, but larger shares, led by financials, staged a rally in the final 40 minutes. That matched a pattern in recent weeks, when the so-called “national team” of state financial institutions has stepped in during the final hour of trade to curb losses from earlier in the day.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/c0be2d30-5ac3-11e5-97e9-7f0bf5e7177b.html#ixzz3liw533b6 Subscribe Sign in Home UK World Companies Markets fastFT Alphaville FTfm Markets Data Trading Room Equities Currencies Capital Mkts Commodities Emerging Markets Tools Global Economy Lex Comment Management Personal Finance Life & Arts September 14, 2015 11:49 am China stocks’ worst day in nearly three weeks after punishments Gabriel Wildau in Shanghai and Patrick McGee in Hong Kong Share Print Clip Comments In this photo taken on September 1, 2015, investors reacts in front of a digital board showing stock market movements at a brokerage house in Shanghai. Chinese authorities have deployed vast sums to try to stabilise slumping share prices, but have to contend with a rumour-driven market and investors like Wang Youfu, whose latest sure thing is a chemical firm that lost $180 million last year. AFP PHOTO / JOHANNES EISELE©AFP Chinese equities tumbled again on Monday, with smaller stocks falling nearly 7 per cent after the securities regulator announced punishments of individuals for market manipulation. The benchmark Shanghai Composite shed 2.7 per cent and the small-cap focused Shenzhen Composite fell 6.7 per cent. For both indices it was the worst session since August 25. More On this topic Shenzhen Composite leads China sell-off Beijing clamps down on forex deals FT View Beijing faces up to its monetary trilemma Comment Robert Zoellick – China will stumble if Xi stalls on reform IN Asia-Pacific Equities Investors focus on bright side of news Nikkei makes biggest gain in 7 years China stocks end with a whimper China market rounds off grim August Sign up now firstFT FirstFT is our new essential daily email briefing of the best stories from across the web The share price falls came as a long-awaited plan to overhaul China’s bloated state-owned enterprises (SOEs) was met with disappointment by investors. Shares in many of the SOEs that were expected to benefit from the plan had risen over the past year, and when it turned out to be less far-reaching than many hoped, investors seized the moment to lock in profits. Monday’s share price falls also came amid growing concern among foreign investors that China’s slowdown is worse than previously thought, and mounting disquiet that measures taken by the Beijing authorities to stabilise the stock market and revive the broader economy are failing. There was more bad news over the weekend, as data released on Sunday showed fixed-asset investment for the year to date through August posting the slowest rate of growth for 15 years. Factory output growth also remained near its weakest level in a decade. The government’s plan aims to make SOEs more efficient and competitive without relying on outright privatisation. But analysts say it is doubtful whether incremental changes, such as selling minority stakes and changing the way directors and executives are appointed, will be enough to reshape the state sector. Stock market losses were even steeper by late trade on Monday, but larger shares, led by financials, staged a rally in the final 40 minutes. That matched a pattern in recent weeks, when the so-called “national team” of state financial institutions has stepped in during the final hour of trade to curb losses from earlier in the day. The China Securities Regulatory Commission late on Friday announced punishments for two wealthy individual investors for manipulating 13 different stocks using fake buy orders to temporarily boost their prices. That sent a chill through short-term speculators on Monday. “For ‘drive-by money’, this was a major blow. Now they lack any impetus to go long,” said Zhu Bin, analyst at Southwest Securities in Shanghai. Mr Zhu also said downward momentum increased after the Shanghai Composite broke below the psychologically important 3,200 level. Following the late-day rally, which pushed the index as low as 3,049, the index closed at exactly 3,200. There was huge variance between sectors: financials rose 0.1 per cent — the only sector to gain — while consumer discretionary stocks fell 6.9 per cent and tech stocks tumbled 8.7 per cent. Of the 1,114 stocks in Shanghai, only 73 rose. By contrast, more than 440 fell by between 9.9 per cent and 10 per cent, the downward daily limit. The apparent government intervention highlights the dilemma that authorities are now facing in dealing with the tumbling stock market, where the Shanghai Composite is now 40 per cent below the seven-year high touched on June 9. The securities regulator said late last month that the government would no longer conduct regular intervention in the stock market, following extraordinary measures launched in July to curb the market’s tumble. Goldman Sachs estimates authorities have injected Rmb1.5tn ($236bn) through various channels. But Monday’s session suggests the national team remains unwilling to sit on its hands if the market falls sharply. Reflecting the authorities’ focus on large-caps, which heavily influence the headline indices, the top 50 stocks in Shanghai managed to finish the day with a 1.5 per cent gain, swinging up 4.2 per cent in late trading. The CSI 500, a collection of smaller-cap stocks, finished the day down 6.6 per cent.