By Chao Deng and Robb M. Stewart
Shares in Shanghai tumbled for a second day, pushing losses on the market’s benchmark index to 5.6% in two sessions, with comments by state-media failing to prop up the market on Wednesday, while Australia’s market fell to a three-month low amid worse-than-expected earnings from the country’s largest bank.
The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP -0.04% closed down 1.6% at 4,229.27, adding to a 4% plunge Tuesday.
The market was up earlier but gave up gains in the afternoon, amid considerable volatility in the property sector, as worries about the likelihood of further stimulus from Beijing returned, said Gerry Alfonso, director at Shenwan Hongyuan Group.
Other analysts noted that financials, which had been holding up the market, reversed to the downside in the afternoon. Among the heavyweights, Bank of China Ltd. was down 1.7%.
Shanghai fell even after state-run Xinhua News Agency published four articles late Tuesday that characterized yesterday’s 4% plunge as a healthy adjustment as markets move to a “slow bull” phase.
Even after recent declines, the index is up 31% year-to-date. “Instead of calling the market plunge as the end to a bull market, we should treat it as a ‘paradigm shift,’” one of the Xinhua articles said.
Hao Hong, managing director at Bank of China Communications International, said the market will enter a volatile correction phase. “The market is no longer cheap relative to bonds,” he said, noting that the return difference between stocks and bonds is at levels seen in 2007 and 2009 when the China market also peaked.
In Hong Kong, the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.47% was down 0.4% at 27,640.91, after falling 1.3% Tuesday. That market has now fallen for five straight days, although it is still up 17% year-to-date.
In Australia, where the central bank Tuesday cut interest rates for the second time this year and to a record low of 2%, the S&P ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.74% finished off 2.3%, at 5,692.20.
A modestly worse-than-expected quarterly update from Commonwealth Bank of Australia Ltd., the country’s largest bank by market value, fueled worries that a yearslong run of record profits and relatively generous dividends from the big lenders is nearing an end.
That added to sentiment already dampened in the wake of a less-dovish-than-anticipated statement on Tuesday from the Reserve Bank of Australia, which cut its key cash rate to a record low but dropped its line that further easing may be appropriate over the period ahead, leading some economists to suggest the easing cycle was ending.
“Selling has been fast and furious amid solid volumes,” said Will Leys, a sales trader at CMC Markets in Sydney.
Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA +0.08% /zigman2/quotes/207018701/delayed CBAUF +0.15% slumped 5.9% after it reported third-quarter cash earnings flat from a year earlier, with pressure still on its margins from competition and expenses growth on the rise, which some investors said suggests tougher conditions ahead for the industry in Australia. The falls leave the shares down 14% from an all-time closing high in March.
Vera Sprothen contributed to this article.