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Slumping Chinese Stocks? Don’t Expect Beijing to Help

Wednesday, 28 Nov 2012 | 3:37 AM ET
Investors watch the electronic board at a stock exchange hall in Huaibei, China.
ChinaFotoPress | Getty Images
Investors watch the electronic board at a stock exchange hall in Huaibei, China.

China's Shanghai Composite Index, at a 4-year low, has shed more than 60 percent of its value since its 2007 peak, and analysts expect little help from Beijing to prop up the ailing market.

"I don't expect any moves to save the stock market. It is just not a priority of the Chinese authorities at the moment," said Daphne Roth, head of equity research for Asia at ABN Amro Private Banking.

"In the past, the government usually came out and said something when the market went around 2,000. This time, they realize that the stock market doesn't benefit the general population and they won't waste their resources with fresh measures."

The index has fallen below the key support level of 2,000 several times this year, and this signals more downside to come, said market participants. On Wednesday it closed at 1,973.52.

Chinese stocks had rallied 5 percent between early September and early October prior to the announcement of the new leadership team in November, but the rally quickly fizzled out in the absence of any fresh policy initiatives.

(Read more: Will China's New Leadership Usher Bull Run for Stocks?)

While the current vice premier and future premier Li Keqiang has vowed to deepen reform so that China can achieve sustainable and healthy economic growth, there will be no new measures to boost the stock market, according to Phillip Chan, director at Shenyin Wanguo Securities in Hong Kong.

"Given the breakthrough below the 2,000 level, the government may still step in but it looks unlikely," he said. "They are worried about it but the stock market is not the highest priority for the government. We don't expect any major initiatives from new leaders for the first year."

China's new set of leaders including Xi Jinping as president will take office next year in March.

Alan Lam, equity analyst with Julius Baer in Hong Kong, also thinks there aren't any major new reforms coming for the stock market.

"In terms of reforms, they may speed it up," Lam said. "But I think they are more concerned with other things like the banking system, renminbi exchange rate, and the bond market. These are longer-term reforms to open up the market rather than short-term ones to boost stocks."

Lam expects the Shanghai index to be rangebound until the end of the year and find a bottom maybe in the first quarter of 2013.

By CNBC's Jean Chua.