Financial Times

Economic nerves return to torment China equities

by Gabriel Wildau ­, Patrick McGee ­and Robin Wigglesworth ­

September 15, 2015 | 1:35 pm
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Chinese equities tumbled again as concerns over the health of the country’s economy continued to unnerve international investors and officials.

The falls came with many economists and investors expecting the Federal Reserve to shelve plans to tighten monetary policy at its pivotal interest rate­setting meeting on Thursday,
largely because of mounting concerns over China and the turbulence it has caused.

The benchmark Shanghai Composite shed 2.7 per cent and the small­cap focused Shenzhen Composite fell 6.7 per cent. For both indices, it was the worst session since August 25.

Meanwhile, a long­awaited plan to overhaul China’s bloated state­owned enterprises was met with disappointment by investors. Shares in many of the SOEs that were expected to
benefit had risen over the past year, and when the plan turned out to be less far­reaching than many people hoped, investors seized the moment to lock in profits.

Yesterday’s share price falls also came amid growing disquiet among foreign investors that China’s slowdown is worse than previously thought, and worries that measures taken by
the Beijing authorities to stabilise the stock market and revive the broader economy are failing.

“It is still unclear whether the policy response in China will be sufficient . . . to dispel concerns about [a] spillover on the global economy,” Deutsche Bank analysts wrote in a report.

There was more bad news over the weekend, as data released on Sunday showed fixed­asset investment for the year till the end of August posting the slowest rate of growth for 15
years. Factory output growth also remained near its weakest level in a decade.

Simmering concerns over China also weighed on western financial markets yesterday, with the FTSE Eurofirst 300 slipping for a third consecutive day and the US S&P 500 also losing
ground.

Some economists and investors have argued that the Fed, faced with signs of weakness in the global economy, should keep rates on hold. Interest rate futures indicate that there is
only a 30 per cent chance the US central bank will lift rates on Thursday, and some traders are betting that it will keep its benchmark rate near zero until 2016.

Shares in bigger Chinese listed companies staged a late rally in the final 40 minutes of the trading day. That matched a pattern in recent weeks, when the “national team” of state
financial institutions has stepped in during the final hour of trade to curb losses.

The China Securities Regulatory Commission late on Friday announced punishments for two wealthy individual investors for manipulating 13 different stocks using fake buy orders to
temporarily boost their prices. That sent a chill through short­term speculators yesterday.

 

By Gabriel Wildau ­, Patrick McGee ­and Robin Wigglesworth ­


by Gabriel Wildau ­, Patrick McGee ­and Robin Wigglesworth ­

September 15, 2015 | 1:35 pm
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