China vows market stability after biggest drop in eight years

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  • China vows market stability after biggest drop in eight years - Global Times
    http://www.globaltimes.cn/content/934172.shtml

    National Bureau of Statistics data showed on Monday that the combined profits of major industrial enterprises have declined 0.3 percent in June from the same period last year and dropped 0.7 percent in the first half.

    Also, the preliminary reading of Caixin’s July manufacturing Purchasing Managers’ Index (PMI) announced on Friday came in at 48.2, which was the weakest reading since April 2014, indicating that the industrial sector is still experiencing difficulties. A reading below 50 shows investments in the industry are dropping.

    But Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said that the weak economic data is only a minor reason for souring market sentiment. “The more important factor is that some stocks on the two bourses are still overvalued, leading to the market correction,” Li told the Global Times on Monday.

    The market has been recovering in recent days. Before the Monday plunge, the Shanghai Composite Index had gained over 16 percent from its July 8 low.

    Authorities announced measures to arrest the market slump that began on June 12, including a relaxation on margin trading rules - using borrowed money to invest in the market - a ban on major shareholders from selling within six months and a crackdown on “malicious” short selling.

    Southwest Securities announced on Monday that one of its shareholders, Chongqing Yufu Assets Management Group, is being investigated by the CSRC, as the Chongqing-based company has allegedly violated relevant laws or rules on reducing its holdings in the company.

    Market fears that the government may withhold further support measures may also be a reason behind the Monday retreat, according to analysts, after the International Monetary Fund (IMF) called on the Chinese government to refrain from rescue measures.

    #Chine, #Bourses