Asian markets mostly fell again Tuesday, with Shanghai seeing another round of wild volatility a day after its heaviest one-day loss in more than eight years.
If banks decide to rein in their exposure to the stock market, it could squeeze a line of credit for potential buyers and so undermine confidence in a price recovery.
Brokerage stocks also lost ground in Shanghai.
The probes are intended to send a message to investors and companies that they should be buying stocks, not selling them.
It was the fifth straight loss for the U.S. market.
“The market has been struggling to hover above the water with investors taking to the sidelines to see if stability can be maintained in the market”, said Ben Kwong, a director at KGI Asia in Hong Kong.
Speculators reduced bets using borrowed money to the lowest level in four months on Tuesday, while the number of new stock investors shrank last week to the smallest since the government started releasing figures in May. The gains were originally driven by commentary in state media that called the stock market undervalued.
On the other side, the global investors seem to be not serious about the stock market crash in the world’s second largest economy.
But the tightening regulation coupled with frothy market conditions apparently triggered a massive sell-off, resulting in 30 per cent plunge in the index, from its previous peak. But there are now concerns the 30 percent decline in the stock market is starting to do damage to China’s economy.
This week’s equity sell-off should have only a limited impact on China’s economy and monetary policy easing will continue as the economic recovery is slow, said a Nomura research note.
The state-run daily Global Times points out that the advocacy by the worldwide Monetary Fund (IMF) that the Chinese government should refrain from rescue measures may have generated a sell-off cascade. The Hang Seng Index was last up 0.9%, although a gauge of Chinese firms listed in the city remained down 0.5%. South Korea’s Kospi fell 0.4 percent.
EUROPE and the U.S. The broader Thomson Reuters CRB commodities index also hit a six-year low. Many expect the Fed to begin its next cycle of rate increases in September or December.
Generic drug giant Teva Pharmaceuticals jumped $8.76, or 14 percent, to $70.61 after it announced it would buy Allergan’s generic drug division for $40.5 billion in cash and stock.
Drugs company Pfizer also beat the street, reporting second-quarter net income of $2.63 billion or 56 cents a share after one-time costs.
But after an exuberant, government-engineered 150 per cent rise over the 12 months to mid-June when the market peaked, and a 29 per cent correction between then and yesterday, analysts said prices can go still lower. However, West Texas Intermediate crude was up 74 cents at $48.13 US a barrel on Tuesday and Brent oil, the most common global contract, rost 23 cents at $53.70.