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By Bloomberg

China’s stocks dropped for the fourth time in five days as turnover waned and concern grew that government intervention is driving away investors.

The benchmark Shanghai Composite slid 1.7 percent to close at 3,694.57 after changing direction more than 10 times. Volume was 35 percent below the 30-day average. Technology and phone stocks led declines, with Leshi Internet Information & Technology (Beijing) Co. and ZTE Corp. losing more than 2 percent.

The value of shares traded on the index has fallen 63 percent from this year’s high in June as the government allowed hundreds of companies to halt trading, restricted short sales and suspended initial public offerings. The number of new investors declined last week to the smallest since the government started releasing figures in May, while margin debt in China has dropped about 43 percent from its June high.

“The measures by the government to restrict selling and the deleveraging by margin traders have contributed to decreasing demand for stocks,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, who’s kept his holdings unchanged. “Confidence will take a while to fully recover.”

The CSI 300 Index lost 2.1 percent. Hong Kong’s Hang Seng China Enterprises Index added 0.5 percent, while the Hang Seng Index gained 0.4 percent.

The Shanghai Composite has tumbled 28 percent from this year’s peak on June 12. A total of 515 mainland companies, or 18 percent of all listings, remain halted from trading, according to data compiled by Bloomberg.

Trading Restrictions

All the 10 industry groups in the CSI 300 fell, with sub- indexes of technology and telecom stocks sliding at least 2.7 percent.

Leshi Internet, the biggest mainland-listed Internet video provider, slumped 7 percent. ZTE, China’s second-largest phone- equipment maker, retreated 2.9 percent. East Money Information Co. tumbled 6.2 percent.

The drop in volumes deepened this week as authorities curbed short sales, investigated algorithmic traders and warned investors against placing large sell orders. While proponents of the intervention say it’s necessary to restore confidence after an almost $4 trillion selloff in mainland shares, critics have argued that China is backtracking on its pledge to give markets more sway in the world’s second-largest economy.

Credibility Damaged

“The government’s unprecedented, rushed market intervention may have supported prices initially but at the expense of its long-term credibility,” Alex Wolf, an economist for emerging markets at Standard Life Investments Ltd., wrote in a report e-mailed Wednesday.

The number of new stock investors last week fell 13 percent from a week earlier to 340,500, according to data from the China Securities Depository & Clearing website. That compares with a peak of 1.64 million in the week ended May 29.

Industrial companies advanced on speculation infrastructure spending will increase demand. Anhui Conch Cement Co., China’s biggest cement maker, climbed 2.4 percent. Sany Heavy Industry Co., the biggest maker of construction machinery, added 3.1 percent.

China is planning at least 1 trillion yuan ($161 billion) in bonds to fund construction projects and help a struggling economy, according to people familiar with the matter.

Bullish Bet

Bears are getting it all wrong on the Chinese stock market, according to Societe Generale SA’s Vivek Misra. While pessimists focus on surging valuations, SocGen’s Asia equity strategist says what matters most is China’s improving long-term outlook for profits and dividends. Misra sees shares gaining 40 percent by the end of 2016 even if economic growth slows.

“Chinese shares have the potential to re-rate,” Misra said by phone from Bengaluru, formerly known as Bangalore.

While the median trailing price-to-earnings ratio on mainland bourses is 65, higher than in any of the world’s 10 largest markets, SocGen predicts profits for Shanghai-listed companies will grow at least 10 percent annually through 2017 as firms distribute about 29 percent of their earnings via dividends. That makes mainland shares look cheap versus peers, based on SocGen’s estimate of equity risk premiums across Asia.

Wednesday’s slump by the Shanghai Composite follows a 3.8 percent rally on Tuesday, which helped send the index’s 100-day volatility gauge to the highest level since February 2009.