BEIJING: China’s stocks tumbled, extending their biggest weekly drop since the global financial crisis.
The Shanghai Composite Index fell 3.5 percent to 4,323.34 at 11:14 a.m. local time. The gauge plunged 13 percent last week, the fastest pace among global equity gauges, amid concern valuations were unsustainable and initial public offerings were luring funds from existing equities. Margin positions on the city’s bourse fell for the first time in a month on Friday, a sign that leveraged investors are unwinding bets.
“Margin calls that led to last week’s drop may continue to affect the market,” said Hong Hao, chief China strategist at Bocom International Holdings Co. in Hong Kong. “Liquidity is still tight today as the money locked up for the Guotai Junan IPO is not released until tomorrow.”
Guotai Junan, which started selling shares Thursday, plans to raise $4.8 billion in its IPO. A preliminary manufacturing gauge rose more than expected Tuesday, while still signaling a contraction. The bull market is intact and investors shouldn’t overly panic, the China Securities Journal said in a front page commentary Tuesday.
The Hang Seng China Enterprises Index added 0.3 percent and the Hang Seng Index was little changed. A gauge of 30-day volatility on the Shanghai Composite rose to its highest since September 2009 on Friday.
Margin traders reduced holdings of shares purchased with borrowed money on Friday for the first time since May 22, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling by 0.2 percent to 1.48 trillion yuan.
All the 10 industry groups on the CSI 300 Index slid, led by technology shares and material producers. The ChiNext gauge of smaller companies plunged 3.5 percent, taking declines from its June 3 record to 19.9 percent, approaching a bear market.
