Mainland stocks sink in late trade with volatility at 18-year high

China’s stocks sank yesterday in the last 30 minutes of trading in thin volumes as traders tested the limits of state support amid the biggest price swings since 1997.
The Shanghai Composite Index slid 2.1 percent to 3,086.60 at the close, wiping out an advance of as much as 1.7 percent, as material and drug companies slumped. The benchmark gauge jumped 4.9 percent on Wednesday in a last-hour rally – the hallmark of state-backed fund buying – after falling dropped 6.1 percent in the first two days of the week.
Volatility is surging and turnover is slumping on concern government intervention will fail to shore up the world’s second-largest stock market amid signs of a deeper economic slowdown. Price swings have been exacerbated by state investigations into market manipulation as well as the Federal Reserve’s interest-rate meeting this week.
“The market is becoming increasingly volatile as state support has caused confusion to the market and investors,” said Li Jingyuan, head of securities investment at Shanghai Zhaoyi Asset Management. “Information on state buying isn’t transparent and it seems that the national team doesn’t have a clear strategy and tactics. So you see a volatile market as investors don’t follow state buying.”
Hong Kong’s Hang Seng China Enterprises Index climbed 0.6 percent, while the Hang Seng Index lost 0.5 percent. The CSI 300 Index dropped 2.2 percent, with gauges of material and healthcare stocks dropping at least 3 percent. Yunnan Copper Co. slumped by the 10 percent daily limit, while Shenzhen Zhongjin Lingnan Nonfemet Co. lost 5 percent. Guangzhou Baiyunshan Pharmaceutical Holdings Co. declined 4.4 percent.
Turnover on the Shanghai stock exchange has tumbled 74 percent from the peak in June. Volumes were 17 percent below the 30-day average yesterday. Bloomberg