BEIJING — China’s stock market opened sharply lower again on Tuesday but other Asian markets managed to recover some ground in early trade.
China’s stock market woes have helped to fuel a global sell-off in shares that gathered pace on Monday, with the Dow Jones Industrials index swinging wildly before ending nearly 600 points in the red.
Early signs on Tuesday were mixed. In China, the main Shanghai share index opened more than six percent lower to set a new eight-month low, but clawed back some ground to trade 4.3 percent lower in late morning trade. But Tokyo’s Nikkei 225 index was 1.7 percent higher and Hong Kong’s Hang Seng index was up 1.2 percent in morning trade.
Concerns are mounting about an economic slowdown in China, although official figures still show an annual gross domestic product growth of seven percent. The stock market has fallen more than 40 percent since June, but remains significantly higher than it was a year ago.
Nevertheless, many traders believe more pain is around the corner for the stock market. Trading in hundreds of shares remains suspended, and brokers said it was unclear what the authorities could do to stop the slide.
“It’s panic selling and an issue of confidence,” Wei Wei, an analyst at Huaxi Securities Co. in Shanghai told Bloomberg. “The government won’t step in to rescue the market again as it’s a global sell-off and it’s spreading everywhere now. It’s not going to work this time.”
Fueling Monday’s decline was disappointment the central bank did note move to add liquidity to the system by cutting banks’ reserve ratio requirement. But traders said even such a move might not be enough to restore confidence now.
“This alone is not going to significantly reverse sentiment,” said Chris Weston, chief markets strategist at IG in Melbourne. “Still, we will need to hear of easing measures fairly soon and we need to hear of commercial banks increasing liquidity to infrastructure projects. “
“China needs to convince the domestic market and the world that its economy is able to cope with further outflows and that its slowdown is under control,” he wrote in a daily note on the markets.
China’s state-run Xinhua news agency made headlines by trumpeting the previous day’s decline as “Black Monday.” But official media seemed more on message on Tuesday, with state-owned tabloid the Global Times arguing that “morale” was needed but that China’s economy was still one of the strongest in the world.
“There is no need to worry because of pessimistic voices from the outside world,” it wrote. “China’s economy is in a bitter period of structural adjustments. We should become inured to face all sorts of problems with grace. This temporary lack of confidence will not snowball to become destructive.”
On Monday, the China’s government’s main economic planning body, the National Reform Development Commission, also tried to reassure investors.
“With the series of policies released by the government, it is expected China’s economic growth will remain stable in the second half,” it said in a statement. “The positive long-term trend hasn’t changed.”
China’s heavy handed actions to stem the stock market slide have included banning large investors from selling shares, launching criminal investigations in short sellers, and arming a state agency with more than $400 billion to buy stocks. But the steps have only served to reinforce concerns about the government’s commitment to free markets.
Xu Jing contributed to this report.