Chinese stocks plummeted yet again on Tuesday morning, defying rapid-fire emergency support measures from Beijing and raising concerns about policy makers’ ability to stabilise one of the most highly volatile markets in the world.
Some high-profile announcements by state-backed investors that they are putting money into the market did little to assuage sentiment, with many investors forced to sell to meet margin calls.
The CSI300 index tracking China’s biggest companies opened down 3 percent and ended the morning 4.4 percent lower, turning Monday’s gain into a blip in a three-week long downward trend. The CSI extended losses when it reopened for afternoon trade.
The Shanghai Composite also wiped out previous session’s gains and tumbled 3.2 percent by midday, despite signs of heavy money inflows into Shanghai-listed blue chips.
Shenzhen’s tech-heavy growth board ChiNext took a bigger hit, tumbling 5.1 percent, while the Shenzhen Composite dived 5.9 percent, reflecting extreme weakness in small caps.
The resumption of the selloff comes despite unprecedented emergency rescue measures announced over the weekend, which included a pause in initial public offerings and a pledge by the central bank to provide liquidity support to the market.
“I don’t see any change in the downward trend,” said Qi Yifeng, analyst at consultancy CEBM.
“It’s only a matter of whether the market will fall more slowly, or continue to go south in a free fall.”
Qi said the policy measures are still too mild to stem the slide, with many investors needing to divest further to meet margin calls.
On Tuesday, state media said that 21 brokerages had shifted over 128 billion yuan ($20.62 billion) into a stabilization fund to meet their weekend pledges to support the market, while 57 mutual fund houses had also started buying equity funds using a combined 2.16 billion yuan of their own capital.
The investment propped up blue chips, including ICBC , China’s biggest lender, oil giant PetroChina , and China State Construction.
However, other mostly smaller stocks fell. In Shanghai, only 34 stocks rose, while 837 companies declined. In Shenzhen, there were 23 gainers, and 1,112 losers.
More than 200 Chinese-listed firms said on Tuesday they would halt trading in their shares, state media reported, joining the scores of companies seeking to shield themselves from China’s plunging stock markets.
The weakness in mainland stocks, as well as sluggishness in global markets hurt investor sentiment in Hong Kong.
The Hang Seng index dropped 1.2 percent, to 24,940.09 points, while the Hong Kong China Enterprises Index lost 2.9 percent, to 11,879.38.