Chinese stocks went on a rollercoaster ride over the past two days, with the action usually gathering speed and magnitude in the final hour of trading, leaving investors struggling to keep up.
On Tuesday the Shanghai Composite index came under sudden heavy selling an hour before the market close at 3pm local time. In the last hour of trading, the benchmark index more than doubled losses to close down 6.1 percent, chalking up its biggest one-day fall since July 27.
The next day, after being deep in negative territory for most of the session, the Shanghai bourse staged a late-day turnaround to finish 1.2 percent higher. Earlier in the day, the key stock index plunged as much as 5 percent to an intra-day low of 3,563.1.
The extreme fluctuations are certainly not a new phenomenon; they were common fixtures during the bear market rout in mid-June, but had tapered following the government's unprecedented rescue package last month. But this week's dramatic moves were less well-flagged.
"With a lack of news, the mystery of Tuesday's [fall] was baffling. Wednesday's moves were more predictable as [Tuesday's] plunge in share prices triggered a series of knock-on effects," Nicholas Teo, a market analyst at CMC Markets, told CNBC by phone.
Experts say there are a couple of factors that could cause the afternoon gyrations.
1. Fragile market sentiment
Though the stock market has somewhat stabilized after a slew of official measures to arrest a sharp correction in June and July, investor sentiment remains fragile.
This has made mainland investors – retail traders make up around 80 percent of the Chinese market – susceptible to acting on rumors and misinterpreting market developments, according to IG's market strategist Bernard Aw, thereby sparking "sudden bouts of substantial slides" in equity markets.
Some market watchers have attributed Tuesday's whopping 6.1 percent slide to traders paring back their bets on support for the stock market, after the China Securities Finance Corporation (CSFC) said Friday it would not intervene further in the market unless there was unusual volatility and systemic risk. Aw thinks that investors may have overreacted to the comments.
"Nervous sentiment over the prospect of a further slowdown in growth is high. On top of that, you also see investors worrying over the withdrawal of support measures but [these worries] are overblown. Because the government isn't going to withdraw all at one go," Aw said. "So it seems that market participants were once again unduly misinterpreting the news."