In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower, dragged down by energy and industrial companies.
The drop took place even as 505 companies were still halted on the Shanghai and Shenzhen exchanges on Friday, or 18% of all listings. Energy and industrial stocks dropped before Saturday's manufacturing data. PetroChina Co., the biggest oil producer, slid 5.3 percent. Air China Ltd. dropped 10 percent; as these companies were among the mostly supported by the government it appears that the Chinese plunge protection team took today off.
This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% – the biggest loss among 93 global benchmark gauges tracked by Bloomberg, as margin traders cashed out and new equity-account openings tumbled amid concern valuations are unsustainable.
As Bloomberg notes, “while unprecedented state intervention spurred a 18 percent rebound by the Shanghai Composite from its July 8 low, volatility returned on Monday when the gauge plunged 8.5 percent. Outstanding margin debt on mainland bourses has fallen about 40 percent since mid-June, while the number of new stock investors shrank last week to the smallest since the government started releasing figures in May. Individuals account for more than 80 percent of stock trading in China. “The support measures may have been less effective than what Beijing imagined,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore.
Worse for China, people's fascination with the equity bubble appears to be fading as demonstrating by tumbling volumes: turnover has fallen as volatility surged. The value of shares traded on the Shanghai exchange on Thursday was 53 percent below the June 8 peak, while a 100-day measure of price swings on the Shanghai Composite climbed to its highest level in six years on Friday.
And while the Chinese government continues to crack down on “malicious sellers”, the latest target are local Nav Saraos, and anyone using spoofing. Spoofing, which involves placing then canceling orders to move prices, is suspected in 24 accounts on the Shanghai and Shenzhen stock exchanges, the China Securities Regulatory Commission said on its microblog.
Elsewhere, the Hang Seng China Enterprises Index of mainland shares in Hong Kong tumbled 14 percent this month, its worst loss since September 2011. The gauge lost 0.1 percent Friday, while the Hang Seng Index advanced 0.6 percent. The CSI 300 Index was little changed. The Nikkei 225 (+0.3%) pared initial losses following a bout of strong corporate earnings after the headline Japanese CPI figure grew at its slowest pace in 2-yrs. Finally, JGB's rose tracking gains in bunds amid month-end buying.
The only notable data from the European morning came in the form of Eurozone CPI (Core Y/Y 1.00% vs. Exp. 0.80%) and unemployment rate (11.10% vs. Exp. 11.00%), with the higher than expected core CPI seeing move higher in EUR , which had outperformed GBP throughout the morning, with some desks attributing the move to month end demand. Elsewhere, CHF has outperformed today after the SNB reported their earnings, which showed a record loss in H1, bringing into question the central bank's ability to continue their intervention policy.
Bunds have underperformed USTs heading into the North American crossover after the better than expected Eurozone CPI data, while USTs remain relatively flat on the day. Also of note, there is a large amount of bond redemptions in Europe presently, with Spain seeing EUR 27.6bIn redeemed yesterday and Italy set for EUR 31.4bIn worth of redemptions on Monday.
The USD trades flat on the day (USD-Index: 0%) with Asia-Pacific hours seeing NZD as the session's laggard, with the latest ANZ business confidence reading showed sentiment among large companies slumped to a 6-year low (-15.3 vs. -2.3) consequently seeing NZD/USD break below the 0.6600 handle.
