China’s stocks fell after posting the biggest swings in 22 months as the Shanghai Composite Index reached a four-year low and investors speculated the government will take steps to bolster financial markets.
The Shanghai Composite lost 0.2 percent to 1,959.51, after fluctuating 114 points between its high and low, the biggest intraday swing since August 2011, according to data compiled by Bloomberg. The CSI 300 Index slipped 0.3 percent to 2,165.42 at the close, trimming a loss of as much as 6.8 percent. The CSI 300 entered a bear market yesterday after the People’s bank of China signaled it will maintain efforts to curb speculative lending. Ping An Bank Co. and China Vanke Co. led a gauge of financial shares to its biggest two-day rout since August 2009.
“There are investors who are hoping the government will unveil some positive measures to bolster the market so they are buying ahead of any announcement,” Zhou Lin, an analyst at Huatai Securities Co., said by phone from Nanjing.
Liquidity risks in China’s financial markets are controllable and seasonal forces affecting interest rates will fade, Ling Tao, deputy director of the Shanghai branch of the People’s Bank of China, said at a briefing in Shanghai after the market close. The central bank will closely monitor the money-market rate going forward and keep it at reasonable levels, he said.
The CSI 300 has fallen 22 percent from this year’s closing high on Feb. 6, while the Shanghai Composite is down 19.5 percent. Losses have accelerated this month after preliminary manufacturing data showed a contraction and on concern surging money-market rates will deepen the slowdown.
The overnight repurchase rate dropped 47 basis points to 6 percent in Shanghai, according to a daily fixing compiled by the National Interbank Funding Center. It reached a record 12.85 percent on June 20 and has averaged 3.12 percent this year.
“The central bank is hawkish about not injecting funds into the financial market immediately and that means the cash crunch will persist for a while,” Li Jun, a strategist at Central China Securities Co. in Shanghai, said by phone.
The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong slid 0.8 percent after retreating 3.3 percent earlier. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 2.7 percent in New York yesterday.
Trading volumes in the Shanghai index were 39 percent higher than the 30-day average while 30-day volatility was at 27, according to data compiled by Bloomberg. The volatility gauge reached 23 yesterday, the highest level since Jan. 30, 2012.
The CSI 300 Financials Index including banks and developers has tumbled 7.9 percent in the past two days, the biggest decline for a two-day period since August 2009. Minsheng Banking, the nation’s first privately owned bank, fell 0.8 percent to 8.44 yuan, after slumping 10 percent earlier. Ping An Bank declined 1.7 percent to 9.98 yuan. China Vanke, the biggest developer, slid 2 percent to 8.85 yuan. Poly Real Estate Group Co., the second largest, lost 2.4 percent to 9.30 yuan.
The CSI 300 Material Index slumped 1.4 percent for the biggest loss among 10 industry groups. Yunnan Aluminium Co. declined 4 percent to 3.80 yuan. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. slumped 3.1 percent to 21.26 yuan.
The Shanghai Composite is valued at 7.97 times projected 12-month earnings, the lowest since Bloomberg began to compile the data in 2006. The 14-day relative strength measure for the index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 15.7. Some investors use readings below 30 as a signal to buy.
The number of Shanghai Composite stocks with RSI readings below 30 reached 586 yesterday, the highest level since Dec. 15, 2011, data compiled by Bloomberg showed. The index had 266 members trading at new 52-week lows, the most since Dec. 4, according to the data.
“Valuations are low and that’s appealing to short-term speculators,” Central China’s Li Jun said. “But the overall trend remains downward as the financial system is still in a money crunch that may hurt economic growth.”
Goldman Sachs Group Inc. and China International Capital Corp. yesterday joined banks from Barclays Plc to HSBC Holdings Plc in paring their growth projections this year to 7.4 percent, below the government’s 7.5 percent goal.
The tumble in Chinese stocks is set to continue as tight credit deepens the nation’s economic slowdown, according to Bank Julius Baer & Co. and Societe Generale SA. The CSI 300’s average bear-market retreat is 36 percent and the mean duration is 241 days, data compiled by Bloomberg show.
Money market rates that have more than doubled in the past six weeks will weigh on China’s indebted developers and manufacturers, said David Poh, who helps oversee $113 billion as the regional head of portfolio-management solutions at Societe Generale’s private bank. While the CSI 300 is valued at a record low versus the MSCI All-Country World Index, shares will only rally once the cash crunch subsides, said Kelvin Wong, an analyst at Julius Baer, which manages $290 billion.
— With assistance by Weiyi Lim