CHINA’S stocks haven’t been so subdued since 1992 as government efforts to maintain stability as well as tightening liquidity deter traders.

    A gauge of 90-day volatility on the Shanghai Composite Index fell to a 24-year low at the end of December and has barely budged since, while turnover on the nation’s equity exchanges slumped to the lowest in two years last week.

    The government took steps to support the stock market last week, according to people familiar with the matter. The shares have been under pressure since the start of December, along with the nation’s bonds, as funding costs rose amid central bank efforts to stave off asset bubbles and support the currency.

    “The national team is buying blue chips, but other investors aren’t following suit,” said Castor Pang, head of research at Core-Pacific Yamaichi HK. “The majority of investors like small and mid caps, but they fear that those stocks may not be rescued by government-backed funds. So they would rather stay on sidelines.”

    State-owned investors bought shares to steady the market last Monday, while some funds were guided Tuesday not to sell holdings with big weightings in benchmark indexes, the sources said.

    The move follows intervention by policymakers to stabilize the world’s second-largest stock market in the wake of a US$5 trillion rout in 2015, when volatility climbed to a 20-year high.

    The Shanghai Composite slumped 12 percent last year, and remains down about 40 percent from its 2015 peak. Combined turnover in Shenzhen and Shanghai exchanges fell to 294 billion yuan (US$40 billion) last Thursday, the lowest for a full-day’s trading since November 2014. The only time it’s been lower was Jan. 7 last year, when circuit breakers ended trading after just 29 minutes.

    “Seasonality is a factor, but more importantly, investors are looking at other alternatives for return, rather than stocks,” said Kenny Wen, strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “They are not confident that stocks will give them a good return even with State support.” (SD-Agencies)