Stock traders in China are looking for some semblance of calm in trading after being spooked by a series of regulatory actions. Instead, they are being challenged by a slew of local media reports suggesting the storm is far from over.
Just days after a commentary by Economic Information Daily jolted online gaming stocks, two articles by the state-run Xinhua and a post by the Ministry of Science and Technology swayed sentiment and triggered another bout of volatility.
The Xinhua reports highlighted the harm of growth hormone to children and the hazard of electronic cigarettes to teenagers, while the government ministry published a report citing a foreign research that linked alcohol consumption as a cause of cancer.
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Changchun High-Tech Industries, which produces growth hormone, tumbled by the 10 per cent daily limit in Shenzhen. China's three biggest liquor distillers including Kweichow Moutai and Wuliangye Yibin fell by as much as 3.1 per cent. Smoore International, a maker of vaping devices, slumped as much as 7.8 per cent in Hong Kong before erasing most of the losses.
"After the last few weeks, even oblique warnings from authorities are ignored at your peril," said Jeffrey Halley, an analyst at Oanda. "It seems that regulatory risk is alive and well in China still."
Thursday's episode underlines the edgy sentiment among investors who struggle to read between the lines in reports published by state-run news outlets, or separate market rumours from official guidance on market or industry policies.
Investors have remained highly alert and sensitive to headline shocks, particularly from publications affiliated to the government mouthpieces like Xinhua and the People's Daily, since a crackdown on the nation's technology and private education operators burned US$1.2 trillion of market wealth in onshore and Hong Kong markets last month.
These reports are not to be scoffed at. Chinese regulators are known to use the media under their control to test public opinions before major policy announcements. This week's critique of online gaming as "spiritual opium" and "electronic drugs" erased US$60 billion from Tencent Holdings' market capitalisation, before those references were retracted.
BCA Research recommends investors to shun Chinese stocks for now, saying regulatory overhang could induce more losses on equities as the pain threshold is yet to be fully tested.
"Some investors have opted to be on the sidelines because of the inability to predict the next step in regulatory tightening," said Cheng Yu, a money manager at HSBC Jintrust Fund Management in Shanghai.
More from South China Morning Post:
- Stock market rout sees MPF members' China fund returns sink 12.4 per cent in July after Beijing's tech crackdown
- Chinese media's broadside and retraction send Tencent, NetEase and gaming stocks on a roller coaster ride that costs billions
- China's state media moves to reassure rattled investors after rout wiped US$574 billion off stock market