Shanghai stocks fall 3.12 per cent by the break

SHANGHAI shares dropped 3.12 per cent by the break on Wednesday, extending their largest daily loss in more than three weeks.

Investors monitor screens showing stock market movements at a brokerage house in Shanghai on August 18, 2015. AFP PHOTO / JOHANNES EISELE

SHANGHAI shares dropped 3.12 per cent by the break on Wednesday, recovering from earlier heavy falls but still extending their largest daily loss in more than three weeks on concerns of waning government support.

The benchmark Shanghai Composite Index dropped 3.12 per cent, or 116.76 points, to 3,631.40. The index had fallen more than five per cent earlier in the morning session.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, was down 2.98 per cent, or 64.76 points, to 2,109.66.

Chinese shares have been highly volatile in recent months, plunging more than 30 per cent in a matter of weeks in June, after having risen over 150 per cent in the preceding year.

The government has launched broadbased intervention efforts to shore up the declines, which sent shock waves through regional markets.

Measures have included barring “big” investors from selling their stakes and cracking down on short-selling — when investors bet prices will go lower.

But slowing growth and a surprise currency devaluation last week — seen as an attempt to boost stalling exports — have weighed on sentiment, despite a pledge by the market regulator on Friday that it will stabilise stock prices for a number of years.

“Some investors are worried that the government would pull out before the market is fully stabilised,” Li Jingyuan, general manager at Shanghai Zhaoyi Asset Management, told Bloomberg News.

“For regulators, they think these measures have already achieved some effect in saving the market.” Wednesday’s decline followed a drop of 6.15 per cent in Shanghai the previous day, the biggest single-day fall since July 27, when it plunged 8.48 per cent.

Gerry Alfonso, a Shanghai-based trader at Shenwan Hongyuan Group, said an absence of a clear direction was causing “overreactions by investors”.

“Eventually the market will turn around,” he said.