HONG KONG (MarketWatch) — Chinese stocks plunged rapidly out of the Wednesday open, with the Shanghai Composite Index starting down 7% and extending the loss to 8.2%, before recovering slightly to 4.8%. The selloff came despite a rare pledge by the People’s Bank of China as the markets opened that it would closely watch stock movements and continue to use multiple ways to support the state-backed margin-finance entity — China Securities Finance Corp. (CSF) — in order to safeguard the stability of the markets and “hold the line against systemic and regional financial risks.” The central bank’s statement came on the heels of a new slate of measures Wednesday by China’s central government to stem recent panic selling, with the CSF vowing to step up efforts buy small- and mid-cap stocks and provide “ample liquidity” to China’s brokerage firms, among other moves. Hong Kong stocks were also dragged sharply lower by the sharp fall on the mainland, as the benchmark Hang Seng Index fell 3.3%, and the Hang Seng China Enterprises Index dropped 4.2%. Major mainland banks suffered especially heavy losses, with China Minsheng Banking Corp. sinking 7.2%, Industrial & Commercial Bank of China Ltd. slumping 6.1%, and Bank of Communications Co. sliding 5.6%. Likewise, securities firms continued their recent dive, as Southwest Securities International Ltd. crashed almost 22%, Shenwan Hongyuan H.K. Ltd. skidded more than 13%, China Everbright Ltd. tumbled 12%, and Citic Securities Co. dropped more than 10%. Haitong Securities Co. was suspended from trading, not citing specific reasons. Various reports said state-owned investment fund Haixia Capital Management had sold its entire stake in Haitong Securities after Tuesday’s close at a deep discount, booking a $330 million loss, in a suspected move to raise cash to help save the mainland Chinese markets.
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