By Chao Deng
Stocks in China fell a second consecutive day as a
government-engineered recovery proved fleeting and surprisingly
strong growth data dimmed hopes for more economic stimulus.
The Shanghai Composite ended down 3% at 3805.70, continuing to
shed gains from a three-day rally that had lifted the benchmark
roughly 13%. The index's losses Tuesday and Wednesday total 4%,
putting it 26% below a seven-plus-year high it reached on June
12.
The smaller Shenzhen Composite fell 4.2% to 2058.84, and the
small-cap ChiNext board shed 5% to 2590.03. Both are down about a
third since their respective peaks in June. A gauge of Chinese
firms listed in Hong Kong fell 1.3%, dragging the Hang Seng Index
down 0.3% to 25055.76.
Trading has begun again this week in hundreds of mainland firms
whose shares were suspended during the downturn. The return of
those shares "pulled money away from other stocks...causing the
overall market to go down," said Gerry Alfonso, director of trading
at Shenwan Hongyuan Securities.
About a quarter of the firms listed in Shanghai and Shenzhen
remained halted as of Wednesday, down from more than half at the
height of the freeze earlier this month. About 696 mainland firms
remain suspended, according to FactSet. The majority of firms
returning to trade Monday and Tuesday hit regulators' upward daily
limit of 10%, whereas only a fraction of those did on
Wednesday.
Another reason for Wednesday's losses is that "some investors
decided to take profits...as there is no clear indication of how
long the rally was going to last," according to Shenwan Hongyuan's
Mr. Alfonso.
The fleeting recovery of the China market, which had trillions
wiped out of it in recent weeks, suggests investor confidence is
far from returning in full. The continued slide reflects deepening
doubts that Beijing can turn things around, despite heavy
intervention in recent days.
China's annualized economic growth held steady at 7% in the
second quarter, according to official data released Wednesday, a
level few economists expected given signs that Beijing's policies
to get the world's second-largest economy back in gear had fallen
short.
The relatively strong reading suggests that the government may
have less incentive to boost investment, which could cool interest
in blue-chips stocks that would benefit, such as state-owned banks
and oil firms, said Zeng Xianzhao, manager at Chongqing-based
Nuoding Asset Management.
"Besides support from state-backed funds, the market needs more
capital from institutional and retail investors for sustained
recovery," he said.
"The stock market disaster may prompt some investors to reflect
on whether it was rational to blindly believe in 'growth stocks.'
It will take a relatively long time for investor confidence to
restore."
Elsewhere, stocks gained as a result of expectations Greece's
Parliament would approve a rescue deal for the country that was
announced Monday. Approval is seen as likely to make it possible
for Greece to remain in the euro currency bloc, although because
the package contains some EUR9 billion of tax increases and
spending reductions over three years, its passage wasn't
assured.
The euro weakened against the U.S. dollar, slipping to $1.0947
by early afternoon in New York from $1.1009 late Tuesday. The
dollar was at Yen123.87, compared with Yen123.39.
Japan's Nikkei Stock Average finished up 0.4% at 20463.33,
Australia's S&P/ASX 200 was up 1.1% at 5636.20 and South
Korea's Kospi gained 0.7% to 2072.91. India's BSE Sensex Index rose
1% to 28198.29.
In Japan, shares of drug makers gained as investors moved into
stocks seen as less dependent on economic developments. Eisai added
3.0%, while Astellas Pharma gained 1.8% and Chugai Pharmaceutical
rose 2.5%.
In Australia, mining stocks were mixed as investors responded to
a decline in iron-ore prices. According to the Steel Index, the
price of the steelmaking raw material fell 1% Tuesday to $49.40 a
metric ton, according to the Steel Index.
Iron-ore producer Fortescue Metals Group shed 0.8% for the day,
while Rio Tinto, which is more diversified, nudged up 0.1%.
Gregor Stuart Hunter and Yifan Xie contributed to this
article.
Write to Chao Deng at Chao.Deng@wsj.com
Access Investor Kit for Fortescue Metals Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=AU000000FMG4
Access Investor Kit for Chugai Pharmaceutical Co., Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=JP3519400000
Access Investor Kit for Astellas Pharma, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=JP3942400007
Access Investor Kit for Astellas Pharma, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US04623U1025
Access Investor Kit for Fortescue Metals Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US34959A2069
