China's volatile shares tumbled again on Thursday, taking losses this month to about 25 percent or 13 trillion yuan ($2 trillion), while state media insisted that the market ructions did not reflect the real economy. The benchmark Shanghai Composite Index ended down 2.9 percent, and the CSI300 index of the largest listed companies in Shanghai and Shenzhen shed 2.6 percent, both indexes having tumbled this week to levels not seen since 2014.
Trading was very light, as many investors have given up on Chinese stocks, burnt by last summer's 40 percent crash and a hair-raising January that has taken indexes back to late 2014 levels. "The majority of equity investors we met over a four-day marketing trip in ASEAN last week had trimmed exposure to China equities by varying degrees and were waiting for signs of stabilisation for potential re-entry," said Japanese broker Nomura.
January began with sharp falls in Chinese stocks and a depreciation in the yuan currency, and the sell-off hasn't abated as economic data confirmed slowing growth and deteriorating business conditions. As the markets keep falling, the prospect of investors being forced to sell stocks bought with borrowed money to cover margin calls has hurt sentiment further. "Margin calls and delveraging is being talked about more and more in a market extremely bearish about China's economy and the yuan's value," said Wang Yu, analyst at Pacific Securities.
China's woes and plummeting oil prices have damaged risk appetite across the world's financial markets, and are complicating the policy calculations of leading central banks. An editorial on Thursday in the People's Daily, the official mouthpiece of China's Communist Party, laid in to "groundless fears" about the economy, which it said was still propelling global growth, and enjoying rising foreign investment, moderate inflation and prudent monetary policy. Market volatility, it said, was not a reflection of the economy but rather showed that the market, regulatory environment and investors still needed to mature.
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