China’s benchmark stock index tumbled to a three-month low as another round of government support measures failed to allay concern that margin trades will keep unwinding at a record pace.
The Shanghai Composite Index slid 5.9% to 3,507.19 at the close. With at least 1,331 companies halted on mainland exchanges and another 747 falling by the 10% daily limit, sellers were locked out of 72% of the Chinese market, Bloomberg reported.
They turned to everything from government bonds to Hong Kong shares and commodity futures to raise cash, sending China’s one-year note yield up by the most on record.
The rout rippled across global markets, dragging down US index futures and fueling gains in haven assets such as the yen.
Policy makers’ latest attempts to stop the selling, including measures to prop up small-cap stocks, were overshadowed by data showing an unprecedented liquidation of margin trades on Tuesday.
Foreign investors extended a record three-day exodus as some said government meddling is making matters worse.
Traders unloaded $15.8 billion (¥98.3 billion) of shares purchased with borrowed money on the Shanghai exchange Tuesday, the 12th straight day of declines. A five-fold surge in margin debt over the 12 months through June 12 had helped propel the Shanghai index to a more than 150% gain.
China’s government is ramping up efforts to combat the rout as policy makers seek to maintain confidence in the nation’s leadership and prevent a crash from weighing on the weakest economic expansion since 1990. China now has more than 90 million individual investors, a constituency larger than the Communist Party.
Among the latest support measures, the China Financial Futures Exchange raised margin requirements for shorting contracts on the small-cap CSI 500 Index.
China Securities Finance Corp. said it will buy more shares of small- and mid-cap companies, while people familiar with the matter said the government agency is seeking at least ¥500 billion in liquidity to support equities.
The government also ordered state-owned firms not to cut holdings in their listed companies.
