China stocks tumble despite positive economic data

CSI300 index falls 4.5%, Shanghai Composite Index loses 4.1%

China stocks tumbled in afternoon trade on Wednesday, despite surprisingly positive official economic data, as a recent post-rout, government-triggered rebound appeared to be running out of steam.

The index of China's largest listed companies tumbled more than five per cent at one point, but eased some losses to end the day down 3.5 per cent, at 3,966.76. The Shanghai Composite Index lost three per cent, to 3,805.70 points.

The slide highlights the difficulty Beijing faces as it seeks to restore confidence in its stock market without signaling investors it is guaranteeing a zero-risk free for all, which would simply reinflate a rally that even regulators said had become too frothy. "Sentiment is still weak," said Du Changchun, analyst at Northeast Securities in Shanghai, adding that he believed most investors were selling off to cash in on a brief, if sharp, rally that pushed up indexes more than 10 per cent last week.

The souring sentiment caused index futures to go negative across the board. China stock index futures for July fell more than four per cent, while the futures tracking small cap index saw most contracts near their maximum daily downside limit of 10 per cent.

The fall comes as a fresh batch of companies resumed trading on Wednesday, leaving only about 25 percent of shares on trading halts, down from more than half during the rout.

Better-than-expected Chinese economic data on Wednesday failed to impress some investors. The economy grew an annual seven per cent in the second quarter.

"Investors liquidated their positions as the GDP (gross domestic product) data failed to impress, while domestic consumption showed no sign of improvement," said Steven Leung, a director at UOB Kay Hian in Hong Kong.

Shenzhen's start-up board ChiNext lost 4.6 per cent. Infrastructure, transport and health care stocks also fell sharply. But banking heavyweights rose, as well as energy giant PetroChina, fuelling speculation that government-backed investors are helping to stabilise the market.

"Either a thousand shares hit limit up, or a thousand shares stay limit down, or a thousand shares are suspended from trading," is how one internet message described the recent status quo in China's stock market.

DRAGON’S CRASH LANDING

• The index of China's largest listed companies tumbled more than five per cent at one point
   
• The Shanghai Composite Index lost three per cent, to 3,805.70 points
  

 

The slide highlights the difficulty Beijing faces as it seeks to restore confidence in its stock market
 

The souring sentiment caused index futures to go negative across the board
 

Better-than-expected Chinese economic data on Wednesday failed to impress some investors