China's Move to Cut Interest Rates Fails to Halt Further Stock Market Meltdown

China's move to cut the interest rates by 0.25 per cent and lowering the bank reserve requirement ratio by 0.5 per cent has failed to calm the stock market turmoil.

Bloomberg reports that the Shanghai Composite Index fell 37.68 points to 2,927.29 on turnover of 461.8 billion yuan ($72.1 billion). It surged up to 4.29 percent and was down as much as 3.85 percent during the day.

Shanghai-listed equities erased $5 trillion since reaching a seven-year high in June, double the  combined size of all stocks traded in Brazil, Russia, India and South Africa.

Meanwhile, the Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 3.05 percent, or 53.31 points, to 1,695.76 on turnover of 432.2 billion yuan.

In Hong Kong, the Hang Seng China Enterprises Index dropped for a ninth day, losing 0.9 percent at the close, The Hang Seng Index slid 1.5 percent to a two-year low. The CSI 300 index fell 0.6 percent as losses for technology companies overshadowed gains for financial shares.

Bloomberg reports that the government has halted intervention in the equity market this week as policy makers debate the merits of an unprecedented rescue.

“The PBOC’s reserve-requirement ratio cut cannot make up for the loss of liquidity resulting from the yuan’s depreciation,” Chia Woon Khien, Singapore-based portfolio manager at Nikko Asset Management Asia Ltd., told Bloomberg. “If we’re lucky, China’s economy will start to recover from the fourth quarter.”