28 Jul 2015

China vows market support as shares tumble

1:48 pm on 28 July 2015

Chinese regulators say they are continuing to buy shares in an effort to prop up the stock market, following the biggest one-day fall for more than eight years.

The main stock index, in Shanghai, dropped almost 8.5 percent on Monday, its biggest drop in a single day since February 2007.

An investor looks at prices of shares (red for price rising and green for price falling) at a stock brokerage house in Huaibei city, Anhui province, China, 27 July 2015.

Fears over the health of China's economy prompted the latest fall. Photo: AFP

Weak economic data on profit at Chinese industrial firms had revived fears about the health of the world's second-largest economy.

Investors were also unsettled by reports that the CSFC had started to return funds it borrowed from commercial banks to stabilise the stock market ahead of schedule, sparking fears that Beijing's commitment to the market may be flagging.

At the beginning of the month, the government in Beijing had to pump money into the country's stock markets after they lost a third of their value in just a few weeks.

The country's top securities regulator, China Securities Finance Corporation, said Beijing would keep buying shares to stabilise the market.

The Chinese government's rescue plan to keep the value of equities has included a police crackdown on short-selling - betting on the decline of shares' values - and a six-month ban on big shareholders selling stocks.

Share prices fell sharply in Europe and the United States in response to the volatility on Chinese markets.

In New Zealand, the reaction was muted - with the benchmark NZX 50 index falling a fifth of a percent this morning.

The dollar also remained relatively stable, with the currency sitting at about 66 US cents.