SHANGHAI -- The stock market here tumbled more than 6% Tuesday, with retail investors spooked by Beijing's unpredictable market stance and cheap oil's impact on China's petroleum sector.
The Shanghai Composite Index ended the day down 6.42% at 2,749, the lowest level since December 2014. Trading began only slightly below Monday's close. But retail investors started dumping their shares near the end of the session, pushed by deepening distrust of Chinese regulators' inconsistent market policy. A mechanism introduced at the beginning of the year to halt trading during particularly turbulent times was scrapped after just four days in use, for example.
Sliding oil prices have only increased selling pressure. U.S. benchmark West Texas Intermediate crude dipped below $30 per barrel in pre-market trading Tuesday. China's three state-owned petroleum giants rank among the largest companies here by capitalization behind state banks, giving them a good deal of sway over the market. Standard & Poor's on Monday downgraded the credit ratings of several state-owned oil companies including China Petroleum & Chemical. The producer shed nearly 5% as fears of heightened borrowing costs scared off investors.
The People's Bank of China on Tuesday plowed 440 billion yuan ($66.8 billion) into the country's economy through its regular open-market operations, following a 400 billion yuan injection last Thursday. Yet such operations are intended to take the place of cuts to Chinese banks' reserve deposit requirements, Ma Jun, the central bank's chief economist, has said. Market players thus took the liquidity injection as a sign that such cuts are less likely, curtailing an otherwise positive response.
The People's Daily newspaper, a Communist Party mouthpiece, carried in its overseas edition Tuesday an editorial rebuking prominent investor George Soros for apparently prompting others to short the yuan and Hong Kong dollar and forecasting a hard landing for China's economy. His "war" on the currencies will not succeed, the article stated. China's economic fundamentals are relatively strong for a large nation, it argued. Yet individuals here remain unconvinced.