HONG KONG (Bloomberg) - Chinese stocks posted the biggest price swings in almost seven years as traders weighed the prospects of government support against continued declines in margin trading.
The Shanghai Composite Index swung between losses of as much as 5.1 per cent and gains of 0.6 per cent, sending 10-day volatility to the highest level since December 2008. The benchmark gauge slipped less than 0.1 per cent to 4,052.47 at the 11:30 a.m. break. Investors sought a floor for stocks after a weekend interest-rate cut and speculation that regulators will halt initial public offerings failed to stem a rout that ended the nation's longest-ever bull market.
"No one can tell for sure where the market's bottom is," said Castor Pang, head of research at Core Pacific-Yamaichi in Hong Kong. "The government will need to take more measures to stop the market's freefall."
Margin debt on the Shanghai Stock Exchange fell for a sixth day on Monday to 1.36 trillion yuan (S$295 billion), the longest stretch of declines since June 2014. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150 per cent gain in the 12 months through June 12.
The CSI 300 Index of large companies jumped 2 per cent, led by rallies for financial and health-care shares. The small-cap ChiNext index in Shenzhen slipped 0.6 per cent. Hong Kong's Hang Seng Index rose 1.2 per cent. The Hang Seng China Enterprises Index advanced 2.2 per cent.
Speculation is growing that policy makers are preparing measures to prop up the world's second-largest stock market. The Economic Observer reported the government is considering steps to stabilize equities including a reduction in the stamp tax, while the finance ministry said it will allow the pension fund to invest in shares.
The government is considering a delay in the IPO of China Nuclear Engineering Corp., according to people with knowledge of the matter. The delay is being considered because of current market conditions, said the people, who asked not to be identified because the information is private.