Shanghai Stocks Dip Into Correction Territory
Investors spooked by margin-trading fears
Shares in Shanghai briefly fell into correction territory early Friday, a reversal of fortune for one of the world’s best performing markets this year.
The Shanghai Composite Index traded as low as 4431.56, representing a drop of more than 10% from its close on Wednesday.
Trading was extremely choppy with the benchmark down as much as 4%, and at several points it was near the flat line.
A stock tote board in Beijing on Thursday. Stocks in Shanghai dipped into correction territory on Friday.
The latest wave of volatility brings to fore the challenges Beijing faces in trying to manage China’s financial markets. Stimulus measures and expectations for more to come have stoked a massive run up in stocks in recent months, but China’s leaders are trying to coax a gradual rise as more foreign money enters and local-investor confidence starts to recover.
“Retail investors are getting nervous after yesterday’s correction,” said Gerry Alfonso, director of trading at Shenwan Hongyuan Securities. But “some positive comments in the local media seem to be having less impact on investors’ sentiment that anticipated.”
The Shanghai benchmark plunged 6.5% yesterday on fears about margin trading and a market bubble, before state-run Xinhua News Agency stepped in to say the downturn was reasonable and that market volatility remains normal. The story quoted China Southern Asset Management as saying “the bull market in medium term has not changed.”
Stocks in Hong Kong were near flat, after losing 2.2% yesterday.
The Shenzhen Composite Index was up 0.8%.