CHINA’S fresh monetary easing triggered stock market gyrations yesterday, with key indices ending down for a fifth straight session after swinging more than 3 percent in both directions in extreme volatility.

    A sharp mid-session rebound following a deep correction in early morning invited waves of selling in the late afternoon, underscoring fragile confidence and deep doubt over whether the central bank’s overnight cuts in interest rates and reserve ratios could stabilize the economy.

    The CSI300 blue-chip index of the largest listed companies in Shanghai and Shenzhen ended down 0.6 percent to 3,025.69, while the Shanghai Composite Index lost 1.3 percent to 2,927.29 points.

    Both indices hit fresh eight-month lows and have lost more than 20 percent in just five trading sessions.

    Some blue chips gained after attracting bargain hunting, but small-caps continued to slide, with some traders attributing the volatility to margin calls and mutual fund redemptions.

    Reflecting improving market sentiment, stock index futures, which slumped 10 percent Monday and again Tuesday, dropped less sharply yesterday, after regulators restricted trading in the instruments.

    The People’s Bank of China late Tuesday cut interest rates and lowered the amount of reserves banks must hold for the second time in two months, in an apparent move to aid the economy and the slumping stock market.

    But the central bank’s moves stimulated prices in banking and real estate stocks, sectors that investors believe will benefit the most from additional liquidity.

    Major carmakers, including BYD, Dongfeng Auto and Changan Auto, also rose sharply as investors bet the central bank’s supportive policies toward auto financing and leasing firms would aid car sales.

    But small-caps remained under selling pressure, with Shenzhen’s startup board ChiNext down 4.3 percent and the CSI500 index tracking small listed companies declining 3.8 percent.

    “The previous days’ slumps have triggered margin calls and forced liquidation in some stocks, which is why you see some investors dumping shares at whatever prices they can sell,” said David Dai, investor director at Nanhai Fund Management Co.

    Some analysts also attributed the slide in ChiNext and some other indices to fears of massive redemption in structured mutual fund products, which have dealt heavy losses to their investors. (SD-Agencies)