Shanghai stocks closed down 1.27 percent in volatile trading on Wednesday, extending days of falls despite a central bank interest rate cut aimed at boosting the flagging economy and slumping shares, dealers said.

China’s benchmark Shanghai Composite Index fell 37.68 points to 2,927.29 on turnover of 461.8 billion yuan ($72.1 billion). It surged up to 4.29 percent and was down as much as 3.85 percent during the day.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 3.05 percent, or 53.31 points, to 1,695.76 on turnover of 432.2 billion yuan.

stock market
Photo: ECNS.

China’s central bank reduced interest rates and cut the amount of money banks need to hold in reserve on Tuesday — its second such double move in two months — in a bid to bolster its economy and end the worst stock market rout in almost two decades.

“The struggle between gains and losses suggests that the market doesn’t really know what to make of the policy move yet,” Bernard Aw, a strategist at IG Asia in Singapore, told Bloomberg News.

“There might be a chance we could see some consolidation in the markets before investors are confident enough to push higher.”

Chinese stocks have lost more than 40 percent of their value since a year-long, debt-fuelled rally collapsed in June, prompting Beijing to unleash unprecedented measures to support the market.

Beijing’s huge rescue package has included funding the China Securities Finance Corp. (CSF) to buy stocks on behalf of the government and barring major shareholders from selling their stakes.

“The prevailing sentiment is still that investors want to cash out, whatever the government does,” Ronald Wan, chief executive at Partners Capital International in Hong Kong, told Bloomberg. “The market will remain under selling pressure for a while.”

Steel makers were among the biggest losers in Shanghai. Hangzhou Iron and Steel plunged by its 10 percent daily limit to 6.81 yuan and Baoshan Iron and Steel fell 6.18 percent to 5.16 yuan.

Property developers also fell. Shanghai-listed Greenland Holdings slumped by its 10 percent daily limit to 13.30 yuan while Shenzhen-listed AVIC Real Estate Holding also lost 10 percent to 8.96 yuan.

Update: 16:20 – Hong Kong shares ended 1.52 percent lower on Wednesday, following a late slump in Shanghai as investors shrugged off a Chinese interest rate cut.  The benchmark Hang Seng Index fell 324.57 points to close at 21,080.39 on turnover of HK$108.89 billion (US$14.05 billion).

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