China’s stocks extended the steepest five-day drop since 1996 in volatile trading as lower interest rates failed to halt a $5 trillion rout.

The Shanghai Composite Index fell 1.3 percent to 2,927.29 at the close, after rising as much as 4.3 percent and declining 3.9 percent. The cuts in borrowing costs and lenders’ reserve ratios were announced hours after the benchmark measure closed with a 7.6 percent drop on Tuesday.

“The prevailing sentiment is still that investors want to cash out, whatever the government does,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “Confidence is already damaged. Doubts over the effectiveness of policies are getting bigger. The market will remain under selling pressure for a while.”

The People’s Bank of China said it will cut the one-year lending rate by 25 basis points to 4.6 percent and lower the required reserve ratio by 50 basis points for all banks. The move, which follows the biggest devaluation of the yuan in two decades earlier this month, comes amid signs of decelerating growth for the world’s second-biggest economy.
Intervention Cost

“The PBOC’s reserve-requirement ratio cut cannot make up for the loss of liquidity resulting from the yuan’s depreciation,” Chia Woon Khien, Singapore-based portfolio manager at Nikko Asset Management Asia Ltd., said in an interview in Bloomberg’s office in Shanghai. “If we’re lucky, China’s economy will start to recover from the fourth quarter.”

The Hang Seng China Enterprises Index dropped 0.2 percent at 3:04 p.m. in Hong Kong, while the Hang Seng Index lost 0.7 percent.

Some Chinese officials argue that falling stocks will have a limited economic impact and the costs of supporting the market are too high, said one of the people, who asked not to be identified because deliberations are private. Officials who back intervention say tumbling shares pose a risk to the banking system, the people said.

China’s margin debt has plunged by 1 trillion yuan ($156 billion) from its June peak as stock traders close out bets using borrowed money amid a $5 trillion rout.

Outstanding margin loans on the Shanghai and Shenzhen exchanges fell to about 1.25 trillion yuan on Monday from a record high of 2.27 trillion yuan on June 18. The Shanghai Composite Index has plunged 45 percent from its June peak