Friday, 03 July 2015 11:55
SHANGHAI: Shanghai shares on Friday extended their plunges of recent weeks, ending the morning session down more than three percent in volatile trading as analysts said panic was setting in.
The benchmark Shanghai Composite Index slid 3.25 percent, or 127.20 points, to 3,785.57.
It tumbled more than seven percent within an hour of the market opening, and at its lowest point was 7.24 percent down before recovering.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 3.14 percent, or 69.66 points, to 2,146.15, having been 7.01 percent down.
Chinese markets were among the world’s best performers earlier this year, with Shanghai rising more than 150 percent over 12 months in a spectacular borrowing-fuelled bull run until it peaked on June 12.
But it has since lost almost 30 percent of its value, putting it firmly in bear market territory, with the losses largely attributed to fears stocks were overvalued, profit-taking and margin traders unwinding their positions.
Margin investors only need to deposit a small proportion of the value of their trade, potentially generating bigger profits but also exposing themselves to bigger losses.
“Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt,” Bernard Aw, Singapore-based strategist at IG Asia told Bloomberg News.
“For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage.”
Interventions by authorities including a surprise interest rate cut at the weekend — the fourth since November — and relaxing rules on margin trading have failed to arrest the declines.
Chen Xingdong, Beijing-based head of macroeconomic research at BNP Paribas, said a stock market bubble had burst, “causing panic”.
“It’s an unprecedented situation in China’s stock market history,” he said.
