China: State Support Fails to Revive Confidence

By Bloomberg News: China’s benchmark stock index tumbled to a three-month low as another round of government support measures failed to allay concern that margin trades will keep unwinding at a record pace.

“There’s really panic out there,” said Tony Chu, a Hong Kong-based money manager at RS Investment Management Co., which oversees more than $20 billion.

While the median price-to-earnings ratio in China has dropped to 53 from 108 at the height of the rally, valuations are more than twice as high as those on the Standard & Poor’s 500 Index.

President Xi Jinping’s government is ramping up efforts to combat the rout. People familiar with the matter said the government agency is seeking at least 500 billion yuan in liquidity to support equities. On the Shanghai exchange, 365 companies suspended trading, equivalent to 33 percent of all listings.

Leveraged positions aren’t big enough to trigger a market collapse, Lau - the bank’s China strategist in Hong Kong,  said. “It’s not in a bubble yet,” Lau said in an interview. “China’s government has a lot of tools to support the market.”

“The market is now falling on the assumption that both China’s economy and financial markets face systemic risk,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. Will be decisive psychology. While Chinese investors are "relatively optimistic" average earnings of households fell by 73.8% for the period from 15 to June 18th.