China Stocks Dive Over 3% Tuesday, Enter Bear Market

China Stocks Dive Over 3% Tuesday, Enter Bear Market

The Shanghai Index slumped more than 7% in the early afternoon but clawed back some ground before the close.

China stocks continued to fall Tuesday, with the benchmark Shanghai Composite Index falling more than 3%.

Chinese stocks closed in the negative territory Monday despite the central bank’s unexpected simultaneous cuts of interest rates and reserve requirements for banks.

The Shanghai Index closed 3.34% lower while the Shenzhen Index lost 5.78%. More than 1,500 shares on the 2 exchanges fell by the daily limit of 10%.

The benchmark Shanghai Composite Index has slumped more than 20% from a peak of 5,178.19 pts on 12 June, following moves to cool debt-fueled rallies and investors’ concerns about bubbles.

Widely considered as a move to forestall further decline, the PBOC announced Saturday to simultaneously cut China’s interest rates and RRR (reserve requirement ratio), the amount of cash banks are required to hold.

The last time the central bank made such a concerted easing effort was back in late Y 2008 at the height of the global financial crisis.

The forceful combined easing failed to soothe the rattled investors Monday who believe soaring stock prices pushed up by a frenzy of speculation are unsustainable.

An official draft guideline released Monday gave China’s pension fund the nod to invest in the stock market.

It restricts the maximum proportion of investment in stocks and equities to 30% of total net assets. Outstanding contributions to the fund stood at CNY 3.06-T(US$500-B) at the end of Y 2014.

Stay tuned…


Paul Ebeling

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