July ends on another low note as stocks record biggest monthly loss in almost six years, despite concerted efforts by Beijing to prop up the exchanges

Chinese share prices suffered a dismal end to a dire month as promises of more emergency measures from officials in Beijing failed to stem a stock market slide that is now reverberating around the global economy.

Despite policymakers’ pledges to underpin the flagging Chinese economy and a further crackdown by the markets watchdog, stocks fell further on Friday and posted their biggest monthly loss in almost six years.

The Shanghai composite index lost 10% this week alone and was down more than 14% for the whole of July. That extends the sharp sell-off that began in China’s stock market in mid-June, a rout that has prompted the country’s securities regulator to warn of “panic sentiment” gripping investors, many of whom are individuals that have borrowed heavily to play the stock market.

The backdrop to the heavy selling on Chinese stock markets, which are still up about 13% from the start of the year, is an economy that appears to be losing steam.

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Warning signs such as softer imports and exports have fanned fears of falling demand for raw materials in the world’s second largest economy and rocked commodity markets. Industrial metals like copper and aluminium have been particularly hard hit, falling to multi-year lows.

The gold price has been buffeted by rising prospects of an interest rate hike from the US Federal Reserve, which would make gold less attractive to investors because it does not offer a yield.

Jasper Lawler, analyst at CMC Markets, sought to sum up a month that has also seen oil prices fall further, but European stock markets eke out modest gains on hopes a stopgap solution has been found to Greece’s debt crisis.

“It is the last day of what has been a crazy month in financial markets. July was the worst month on China’s benchmark stock index in six years, gold had its largest monthly decline since 2013 but stocks have pulled back from Greece-induced losses in June,” he said.



Despite the sharp falls of recent weeks, fears linger over the frothy nature of China’s stock market, which surged more than 150% in the 12 months leading up to June’s turning point. Traders are braced for more swings to come, and economists expect further announcements from the authorities in Beijing as they seek to restore confidence.

The country’s securities watchdog, the China Securities Regulatory Commission, said on Friday it was probing the impact of automated trading on stock markets. It was the latest in a series of moves aimed at steadying markets by curbing what officials see as speculative selling.

Because so many of the investors in the market are individuals, there are fears that deepening losses risk denting the real economy and even fuelling social unrest. But financial market experts have questioned how much officials can do to calm the volatility, after efforts that have included extending government-backed loans to investors in order to buy shares.

Analysts at Fathom Consulting said the latest signs were not encouraging. “Further falls in Chinese equity indices this week, in the face of substantial official intervention, suggests that policymakers in that country are not as omnipotent as many seem to assume,” they wrote in a research note.