‘Panic’ as Shanghai Composite tumbles, again

The Shanghai Composite Index finished down 5.8% Friday and was 12.1% down for the week.

The index – the main measure of China’s largest stock market – has now fallen by 30% since its June 12 peak.

The bust follows a huge run up.  The index has nearly doubled since last year.

“Panic has set in as traders call in investors' margins loans,” ABC reports.

Bloomberg says margin traders continue to unwind positions amid doubts over the effectiveness of government measures to support equities.

A new crackdown on market manipulation and mis-selling of investment products by the securities regulator has failed to stop the falls, ABC says.

The Wall Street Journal notes Chinese officials over the past week have dug deep for measures to stop massive stock selloffs. Still, the array of attempts — from lifting restrictions on investing with borrowed funds to cutting interest rates (this week cut to 4.85%, the lowest level in a decade) — have so far failed to encourage investors to buy.

In its latest efforts to quell market skittishness, China’s securities regulator on Friday said it would slow the pace of approving new stock offerings and limit their size, the Journal reports.

The regulator will allow 10 companies to list on the domestic stock markets in the first 10 days of July. By comparison, 23 companies were approved and listed in the first 10 days of June.

Makes RBNZ cut more likely
NBR economics editor Rob Hosking says the “Greek tragedy and Chinese burn” mean the RBNZ’s next cut could come as soon as the next review, on July 23 – and a third cut is looking increasingly likely.

The hit to Chinese investors’ pockets comes at the same time as the October deadline approaches for tighter monitoring of foreign buyers of NZ homes – a move NBR columnist Michael Coote says has spooked some of the “naughty money”.

The NZ dollar has been a counter-veiling force, however, with its fall making houses and other assets cheaper for foreign buyers.

The Chinese share market crash has occurred in concert with a slowdown in the broader economy.

Harbour Asset Management research analyst Oyvinn Rimer says he’s not too worried about how the Chinese economic slowdown will affect New Zealand’s economy. Read more of his analysis here.