BEIJING: China’s stocks slumped, extending Tuesday’s plunge, amid growing concern the government will pare back support for the equity market and a weaker yuan will spur capital outflows.
The Shanghai Composite Index dropped 3.1 percent to 3,631.40 at the noon-time break, set to close below its 200-day moving average for the first time in a year. Eight stocks declined for each that rose on the gauge, which sank 6.2 percent on Tuesday. PetroChina Co., long considered a favorite holding of state-linked rescue funds, lost 5.1 percent.
Stocks have tumbled this week after the securities regulator said late Friday that China Securities Finance Corp., the state agency tasked with supporting share prices, will reduce buying as volatility falls. China’s richest traders are cashing out of stocks, while a record drop in yuan positions at the central bank and financial institutions last month signaled investors are moving money out of the country.
“There’s a big worry about how persistently the government could support the market,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “The yuan’s depreciation is causing a wave of selling, creating instability in the market as capital outflows become a reality.”
