Chinese shares in freefall, trading suspensions rocket

UPDATED: Chinese share rout resembles Wall Street in 1929

Chinese stocks have gone into freefall as nearly half of the listed companies rushed to halt trading.

Some 1287 listed companies have put their stocks in a trading halt as of today, accounting for well above 40% of the entire pool of 2808 issuers.

At the close, the Shanghai Composite Index was down 5.9% at 3507, moving off of an 8.2% loss earlier in the day. The smaller Shenzhen Composite as down 3.9%.

The plunge has also dragged down the Hong Kong market, where many of the same Chinese companies also list.

The Hang Seng Index plunged 7.4% to 23,146, widening earlier losses, while a gauge of Chinese companies with Hong Kong listings, known as H-shares, also fell sharply.

Stocks and Chinese bonds traded offshore, even high-quality corporate bonds issued by top state-owned companies, are also being dumped.

China’s yuan, freely traded in the offshore market, has hit a four-month low against the US dollar amid a dimming outlook for the world’s second-largest economy.

A spokesman for the China Securities Regulatory Commission, Deng Ge, describes the current market mood as “panic sentiment.”

In a statement, he says, “Irrational selloffs have increased greatly and that has led to a liquidity tension in the stock market.”

China’s main stock benchmarks have lost more than a third of their value since hitting mid-June highs.

The number of trading halts is unprecedented in the history of China’s equity markets.

Many of the companies haven’t disclosed reasons for their suspension, though some cite the consideration of unspecified significant events, asset restructuring or private share placements.

The heavy losses came despite a rare pledge earlier today by the People’s Bank of China that it will closely monitor stock movements and continue to use various means to support the state-backed margin-finance entity – China Securities Finance Corporation (CSF) – to protect market stability.

The central bank’s statement is the latest in a slate of measures in recent days to support the equity market, including the purchase of shares and the easing of margin-lending rules.