ChiNext And Shanghai Break Closing Lows

ChiNext avoided breaking its intraday low of 2485, Shanghai did break its intraday low during trading. Both closed at new lows for this current bear move.

Bloomberg: Shanghai Composite Tumbles Below 4,000 as State Support Fails

The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past. While China’s securities regulator eased margin-trading rules and the nation’s exchanges announced fee cuts overnight, the moves failed to revive confidence in a market that has wiped out the equivalent of France’s entire equity capitalization in three weeks.
“Four thousand is the psychologically critical level that should not have been broken,” said Castor Pang, head of research at Core Pacific Yamaichi in Hong Kong. “The government will have to and need to come up with more measures otherwise the market is poised to drop further.”

China's already into malinvestment and unforeseen consequences territory with the latest bout of intervention in the stock market.

Caixin: Gov't Once Again Tries to Pull Stock Market out of Nosedive

The Shanghai and Shenzhen bourses said later that day they had reached an agreement with the stock market's clearinghouse to cut the transaction fees they charge. The new rates, which will become effective on August 1, are about two-thirds of their current levels.

The bourses said they trimmed the fees to reduce investors' transaction costs on the orders of the securities regulator. Pervious changes have encouraged trading and led to market rallies.

The guaranteed to fail bailout moves are those designed to increase activity. Either you succeed because psychology hasn't shifted and reinflate the bubble, or it has zero effect because once psychology shifts, people require fundamental motivation to switch back. This happens with the housing market, where cuts in taxes and interest rates fail to spur buying. It happened all over the world with credit and lending. Once a borrower reaches peak debt, they do not want more debt even if the interest rate is 0%. Even Greece doesn't want more debt.

He says the most urgent task the regulator faces is to break the cycle of lower prices and forced sales to avoid triggering an avalanche of sell-offs, which he suggests may happen if the Shanghai Composite Index falls to about 3,400 points.

I can't remember where I saw it, but someone had a target around 2500-2800 if margin completely collapses. At 2500, the market would be a good value again and it would still be up year-over-year into November.

Chart from: Red China Goes Redder, Stocks Tumble Despite Government Ban On Bearish Talk