China trade halts hit US$2.2 trillion as state intervention fails

[HONG KONG] A wave of Chinese companies halted trading in their shares and regulators unveiled new measures to prop up the value of small-cap stocks in the latest attempts to stem a rout that's wiped more than US$3.5 trillion of value.

At least 1,249 companies have halted trading on mainland Chinese exchanges, locking up US$2.2 trillion of shares, or about 33 per cent of China's market capitalization. The China Financial Futures Exchange raised margin requirements for sell orders on CSI 500 index futures, while China Securities Finance Corp. said it will buy more shares of small- and mid-cap companies.

The measures, which follow stock purchases by state- directed funds and interest-rate cuts by the central bank in recent weeks, failed to revive confidence among stock investors as the Shanghai Composite Index tumbled 7.5 per cent in early trading.

Selling by leveraged traders is weighing on the market, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling by a record 8.5 per cent on Tuesday.

"The market has failed," said Hao Hong, a China strategist at Bocom International Holdings Co in Hong Kong. "The market has become less transparent, less efficient, and less fair."

BLOOMBERG