Now this is a serious slide from China.
Chinese stocks fell the most in four months on Thursday after reports that China Central Huijin Investment Lt., part of China’s sovereign wealth fund China Investment Corp. (CIC), had cut its stakes in the country’s biggest state-owned banks for the first time.
The Shanghai Composite Index plunged 6.5% to 4,620.27, the biggest daily percentage decline since January 19, when the index dived 7.7% after China tightened up margining-trading rules.
The CSI300 index also lost 6.5% as well. In terms of points shed, the two indexes suffered their heaviest single day loss since 2008. And The Shenzhen Composite lost 5.5% its third biggest fall in five years.
The fall in China triggered nervous trading in Europe and the US, leaving most markets with small losses. Our futures trading saw a tiny rise in the SPI of just 2 points. The Aussie dollar dipped closer to 76 US cents and iron ore prices fell 1.2% to $US62.30 per tonne.
The Shanghai market opened higher on Thursday, and even hit a fresh 7-year high of 4,986.5 in the morning trading. However, the index plunged in afternoon trading as news of the bank share sales by the sovereign wealth fund offshoot became known.
Total turnover on the two markets reached an all-time high of around 2.4 trillion yuan (400 billion U.S. dollars), the fourth consecutive trading day that saw turnover beating 2 trillion yuan.
The Shanghai Stock Exchange saw A share turnover hit 1.2 trillion yuan ($US193.57 billion), an all time record high, on the selloff, while Reuters reported that official data showed the outstanding value of margin finance hitting a record 2 trillion yuan on Tuesday, or more than $US320 billion (no wonder there’s a tightening of margin lending activities).
Media reports said the filings to Hong Kong Exchanges & Clearing showed that China Central Huijin sold 300 million Shanghai-listed shares of Industrial and Commercial Bank of China Ltd. (ICBC) and 280 million Shanghai-listed shares of China Construction Bank Corporation on Tuesday, for a combined amount of over 3.5 billion yuan ($US560 million),
The figures are not substantial, but they are far more symbolic. As a result financial shares suffered a wide selloff in Shanghai, with China Construction Bank Corporation, ICBC, Agricultural Bank of China and Bank of China Ltd. all losing more than 5%.
Chinese securities firms also took a hard hit after several brokers tightened up their margin-financing requirements in recent days, including increasing the amount of cash clients must put down for their deposits.
Regional investors cited several major Chinese brokerages tightening requirements on margin financing, which triggered fears of further regulatory steps to reduce leverage in the red-hot market.
Analysts said that the brokers took the action ahead of the IPOs next week from more than 20 new Chinese companies which would have normally (this year at least) seen a surge in margin buying by small investors looking to make a quick profit.
Hong Kong shares dropped a nasty 2.3% as well yesterday, while Australian shares also fell with the ASX 200 index lost 0.2% (after being down more) after weaker than expected business spending data set off talk of more rate cuts from the Reserve Bank.
