China's tumbling
stock market showed signs of seizing up on Wednesday, as companies
scrambled to escape the rout by having their shares suspended and
indexes plunged after the securities regulator warned of "panic
sentiment" gripping investors.
Beijing,
which has struggled for more than a week to bend the market to its
will, unveiled yet another battery of measures to arrest the sell-off,
and the People's Bank of China said it would step up support to brokerages enlisted to prop up shares.
The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index .SSEC dropped 5.9 percent.
With
nearly half the market on a trading halt and another round of margin
calls forcing leveraged investors to dump whatever shares could find a
buyer, blue chips that had been supported by stabilization funds earlier
in the week bore the brunt.
"I've
never seen this kind of slump before. I don't think anyone has.
Liquidity is totally depleted," said Du Changchun, an analyst at
Northeast Securities.
"Originally,
many wanted to hold blue chips. But since so many small caps are
suspended from trading, the only way to reduce risk exposure is to sell
blue chips."
More than 30
percent has been knocked off the value of Chinese shares since mid-June,
and for some global investors the fear that China's market turmoil will
destabilize the real economy is now a bigger risk than the crisis in
Greece.
"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."
Commodities
markets reflected growing concerns about the broader health of the
world's second largest economy, with copper prices falling to a six-year
low, Shanghai nickel futures sliding by their 5 percent daily limit,
and oil falling toward $56 a barrel, near a three month-low.
TRADING HALTS
More
than 500 China-listed firms announced trading halts on the Shanghai and
Shenzhen exchanges on Wednesday, taking total suspensions to about
1,300 - 45 percent of the market or roughly $2.4 trillion worth of stock
- as companies scuttled to sit out the carnage.
