Chinese stock index sheds 345.35

Shanghai trading off 8.5%, biggest single-day fall since ’07

Investors follow stock price quotations Monday in Qingdao in east China’s Shangdong province. The Shanghai composite fell 345.35 points Monday with about 1,800 listings falling by the daily limit of 10 percent.
Investors follow stock price quotations Monday in Qingdao in east China’s Shangdong province. The Shanghai composite fell 345.35 points Monday with about 1,800 listings falling by the daily limit of 10 percent.

BEIJING -- China's summer stock market roller coaster continued Monday as the Shanghai composite index dropped 8.5 percent, its biggest single-day fall since 2007, casting doubts on stabilization moves from Chinese authorities.

The Shanghai composite lost 345.35 points Monday to close at 3,725.56, with about 1,800 listings falling by the daily limit of 10 percent. That's off more than 28 percent from Shanghai's peak in mid-June, but is still 76 percent higher than it was a year ago. The Shenzhen composite fell 7 percent on Monday.

Other Asian markets closed down as well, though their drops were not as steep. Japan's Nikkei index lost about 1 percent, and Hong Kong's Hang Seng index fell about 3 percent.

The drops followed a downbeat week on Wall Street last week and data showing slowing activity in China's manufacturing sector last month. That sign of weak demand led investors to shun commodity-oriented shares, analysts said.

"A weak lead from the U.S. and ongoing nervousness about commodity markets will see stock market trading start the week on a downbeat note," Ric Spooner, chief analyst at CMC Markets, said in a commentary.

Chinese stocks have swung wildly this summer, wiping out billions of dollars in gains and prompting intervention from Chinese authorities earlier this month. The government restricted selling, halted initial public offerings, urged brokerages to hold stocks, seeded a $19 billion fund to encourage brokerages to buy shares, and tamped down on negative sentiment online and in the media. That led to some rebound in prices.

Though Chinese markets are largely closed to foreign investors, the volatility -- and China's response -- has raised concerns around the world. Though some observers have praised China's interventions, others have said the moves call into question Chinese leaders' professed commitment to market liberalization and integration with the wider global financial system.

Chinese authorities have talked up stock market investments in recent months, encouraging citizens to buy shares, even as economic growth looks to be flat or slowing. China's gross domestic product grew 7 percent in the first half of the year, faster than most countries but a decline from the double-digit growth rates of just a few years ago. China said its GDP grew 7.4 percent in 2014.

Continued volatility in the stock markets could lead to loss of confidence among investors and weaken consumer demand just as Chinese authorities are trying to rebalance the economy to rely less on manufacturing and exports and more on services and domestic consumer demand.

"The bottom line is, when you have a market as volatile as China, you're going to have violent corrections," said Fraser Howie, co-author of Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise. "Downside moves are more extreme than upside movies, because fear overpowers greed."

Howie added that Monday's tumble is likely an unintended consequence of the communist government's major stock market intervention early this month.

"The reality is you have a highly rigged market at the moment, and you have a lot of panic and fear that if the government isn't there, it's going to collapse," he said. "This is a horrible situation to be in."

Information for this article was contributed by Tommy Yang in the Los Angeles Times.

Business on 07/28/2015

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