China’s main indexes eased early on Tuesday hit by selling in blue chips, but small caps extended their rebound as hundreds of companies resumed trading after recent suspensions.
Hong Kong shares also weakened, dragged lower by listed mainland companies.
As China’s market shows signs of stability, the Chinese securities regulator stepped up its crackdown on unregulated, grey-market margin financing – seen by many as the root of the market’s boom and bust.
The CSI300 index fell 0.9 percent, to 4,173.29 points at the end of the morning session, while the Shanghai Composite Index lost 0.3 percent, to 3,957.84 points.
The key indexes were dragged lower by banking heavyweights , major steelmakers and oil giant PetroChina .
But small caps extended their gains. Shenzhen’s start-up board ChiNext jumped 3.4 percent, the SME Composite Index rose 2.7 percent and the CSI500 index tracking China’s 500 small companies gained 3.1 percent.
Renewed buying interest prompted hundreds of listed firms, mostly small caps, to resume trading after many suspended their shares during the recent market rout.
On Tuesday, more than 250 companies restarted trading, following about 350 resumptions on Monday, potentially pressuring market liquidity.
“The sentiment seems to have changed rather quickly with even a modest increase in leverage, which is surprising after the recent market correction,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities Co.
Nomura said: “The most panicky period in Chinese equities in 2015 is likely behind us.”
“But for both indices to revisit their annual highs and to make new highs, we need further consolidation through mid-August’s interim reporting period and high frequency macro data.”
Banking stocks dropped on Tuesday morning, despite better-than-expected lending and money supply data in June. Most blue chips also fell.
Hundsun Technologies Inc, the financial information technology company controlled by Alibaba Group Holding Ltd founder Jack Ma, surged 10 percent, despite an investigation by regulators.
The China Securities Regulatory Commission said late on Monday it was investigating Hundsun, whose trading platform is viewed by many as facilitating grey-market margin loans and identity fraud.
In Hong Kong, the Hang Seng index dropped 0.6 percent while the Hong Kong China Enterprises Index lost 1.5 percent.
Alex Wong, a director at Ample Finance Group, said: “Most of the positive news has already been out. We don’t expect to see any further good news that can boost the market for the time being.”
“We can say the (Beijing’s) measures are a success in stopping the market from sliding further. While on the other hand, it is in fact a failure in giving investors’ hope of a healthy development of the market after the artificial rally.”