China state media seeks to calm investor nerves after stock rout

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BEIJING – China’s state media sought to soothe investor nerves amid a stock rout that has pushed the nation’s benchmark equity index to the brink of a bear market, stressing there was no onshore systemic risk.

The effort to talk the market up comes after investors dumped stocks in the crosshairs of Bejing’s sweeping regulatory crackdowns. As of the close on Tuesday (July 27), nearly US$1.5 trillion (S$2 trillion) of market value has been wiped off Hong Kong and mainland shares since last Thursday, according to Bloomberg-compiled data.

Such declines are unsustainable and the market will stabilise quickly, the Securities Daily reported, citing fund managers. The recent slump has “to an extent, reflected the misreading of policies and venting of sentiment by some funds”, wrote the Securities Times in a front page editorial, adding that economic fundamentals are unchanged and the market may stabilise at any time.

The jawboning follows dramatic stock moves this week, which underscored the fragility of investor confidence as a months-long regulatory onslaught by Beijing escalates. The benchmark CSI 300 index is another 2.2 per cent away from slipping into a bear market, nearing a decline of 20 per cent since a February high. Hong Kong’s Hang Seng Index this week posted its biggest two-day loss since October 2008.

Traders fear the latest crackdown on the nation’s education, food delivery and property sectors could expand to other industries such as health care, as China looks to tighten its grip on Big Tech and reduce the wealth gap. Beijing has targeted private enterprises it blames for exacerbating inequality and increasing financial risk.

“While adjustment of polices in some industries may affect their current business model, it will be beneficial toward unleashing more social vitality in the mid-to-long term and aid consumption in most other areas,” the Securities Times said, adding that overall valuations in the A share market are reasonable, an advantage over United States and European markets.

Elsewhere, the China Securities Journal echoed other publications in saying there was no systemic risk, and cited domestic mutual and private fund managers saying that there is no need for investors to be overly pessimistic. The Shanghai Securities News also carried a piece citing analysts that the decline has brought buying opportunities in quality stocks.

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