BEIJING, Sept 18 — China’s stocks headed for the steepest weekly loss this month in shrinking turnover amid growing concern government measures to support the world’s second- largest equity market and economy are failing.

The Shanghai Composite Index has dropped 3.2 per cent this week, led by technology companies and commodity producers. The gauge gained 0.4 per cent to 3,098.29 at the 11:30 a.m. local- time break in volumes 47 per cent below the 30-day average. A gauge of 100-day volatility climbed to an 18-year high on Wednesday.

“The market has no confidence and no fresh money wants to pile in,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co “The economy is very weak.”

Data this month showed five interest-rate cuts since November and plans to boost state spending have yet to revive an economy weighed down by overcapacity and producer-price deflation.

The government has spent US$246 billion (RM1.04 trillion) purchasing equities since the US$5 trillion selloff began three months ago through August, according to Goldman Sachs Group Inc.

The Hang Seng China Enterprises Index rose 1 per cent in Hong Kong, extending an advance this week to 3.5 per cent. The Hang Seng Index added 0.5 per cent. The CSI 300 Index gained 0.6 per cent, led by technology shares.

The Shanghai Composite has tumbled 40 per cent from its June high as leveraged investors fled amid concerns valuations weren’t justified given the growth outlook. Equities on mainland bourses trade at a median 46 times reported earnings. That’s the highest among the 10 largest markets and more than twice the 18 multiple for the Standard & Poor’s 500 Index. The Shanghai Composite, where low-priced banks have some of the biggest weightings, has a ratio of 15.

Margin trades

Gauges of technology and financial on the CSI 300 climbed at least 0.9 per cent. People.cn Co, the online business of the Chinese Communist Party’s official newspaper, advanced 7 per cent, while East Money Information Co added 4.1 per cent. Haitong Securities Co gained 3 per cent and Ping An Insurance Co rose 2.3 per cent.

Margin traders increased holdings of shares purchased with borrowed money for a second day yesterday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 590.5 billion yuan (RM392.507 billion).

In a statement posted on the official microblog, the China Securities Regulatory Commission called for careful screening of non-compliant margin-funding accounts. Local securities regulators should screen and identify unregulated margin-trading accounts carefully, the CSRC said, adding that it will continue to clean up illegal securities businesses.

Fed Decision

Home prices rose in August in half of the 70 cities monitored by the government, spurred by easing of home-purchase restrictions and interest-rate cuts.

Prices rose in 35 cities, compared with 31 in July, the National Bureau of Statistics said today.

The Federal Reserve kept its policy interest rate unchanged, showing reluctance to end an era of record monetary stimulus in a time of market turmoil, rising international risks and slow inflation at home.

A US rate increase would have been negative for China as it would have spurred more capital flight, currency depreciation and stock-market volatility, Liao Qun, chief economist at Citic Bank International Ltd, said by phone from Hong Kong yesterday. — Bloomberg