Chinese, Japanese Stocks Fall Again On Continued Worries About Global Economy, In Volatile Trading

SHANGHAI -- Following Tuesday’s falls on world stock markets, markets in China and Japan again fell Wednesday, as weak manufacturing figures from both China and the U.S. continued to depress investor sentiment. In a volatile day’s trading, several other Asian markets also fell -- though Australia and South Korea bucked the trend.

In China the main Shanghai Composite Index fell more than 4 percent on opening. It later recovered into positive territory, led by banking stocks, but fell back to close 0.2 percent down at 3,160. The secondary Shenzhen Composite Index dropped 2 percent, while the Nasdaq-like ChiNext index for high-tech shares closed 1.8 percent lower, adding to its fall of more than 5 percent Tuesday.

The continuing drop in Chinese share prices came in spite of reports that the government had persuaded some of the country’s biggest brokerages to contribute a further 100 billion yuan (about $15 billion) to a fund that will invest in blue-chip stocks in an attempt to stabilize the market.

Analysts said investors were still concerned about Tuesday’s manufacturing data, which saw the official Purchasing Managers’ Index (PMI), a measure of factory output, fall to 49.7 -- its lowest level in three years -- and also about data from the U.S., which showed factory activity at its lowest point for two years.

Japan’s Nikkei 225 Index also fell, after rising earlier in the day on bargain hunting following a decline of almost 4 percent Tuesday. Concerns about both China’s growth and U.S. interest rate hikes saw it close 0.4 percent lower at 18,095. Hong Kong’s Hang Seng Index also fell again, ending the day down 1.2 percent.

The only major markets that saw stocks move into positive territory were Australia, where the ASX200 closed 0.1 percent higher; South Korea, where the Kospi Index finished fractionally higher; and Singapore, where the Straits Times Index was up 0.04 percent in mid-afternoon trading.

China on Wednesday again unveiled measures aimed at boosting its economy, as falling export demand and other factors fuel predictions that its GDP growth could fall well below its target of about 7 percent in the third quarter. State media said Wednesday that the government would set up a national fund worth more than $9 billion, to help small and micro-businesses.

The authorities have also lowered the threshold on the capital requirement for some fixed-asset investment projects -- including the construction of airports, railways, subways, highways and ports -- in an attempt to stimulate construction. The move follows reports that China's fixed-asset investment growth slipped sharply in July to 11.2 percent -- its lowest rate in a decade, and significantly lower than the government's 15 percent target for the year.

State media also said that 50 of the country’s biggest brokerages would each contribute 20 percent of their assets to the market stabilization fund, following speculation that the authorities were rolling back efforts to stop the market from falling too far. Over 20 major brokerages previously contributed more than $19 billion to the fund in early July; however their efforts at that time appeared to have only a short-term effect, as the Chinese stock market is currently more than 10 percent down on its early July low point -- though it still remains 50 percent higher than it was before it began a dramatic bull-run a year ago.