Chinese stocks slide to 4-month low
Print Edition
CHINESE shares fell to their lowest level since September yesterday, with the benchmark Shanghai Composite Index losing 5.3 percent to 3,016.70 points, extending last week’s near-10 percent loss.
The Shenzhen Component Index, meanwhile, lost more than 6.2 percent to close at 10,212 points.
About 2,300 shares declined in Shanghai and Shenzhen yesterday with little evidence of the state-backed fund buying blue chips that helped shore up equities. Shares declined even after the yuan gained on a stable fixing from the central bank.
Among the biggest losers were Guangdong Meiyan Jixiang Hydropower Co, which fell by the 10 percent daily limit to 6.53 yuan, Citic Securities Co, which lost 6.8 percent to 15.68 yuan and China Shipbuilding Industry Co, which shed 6.7 percent to 8 yuan.
Policy-makers removed the circuit-breaker system on Friday, which caused local exchanges to close early on two days last week after stocks plunged to a 7 percent limit, after blaming it for magnifying the volatility that wiped US$1 trillion of shares in the first trading week of the year.
“The removal of the circuit breakers didn’t change the downward trend of the market amid weak economic fundamentals,” said Hong Hao, chief strategist at BOCOM International.
“The turnover was small last week due to the mechanism but the concern was eased through sufficient funds yesterday,” he said.
Official figures released on Saturday showed that the producer price index, a measure of inflation at the factory gate and a harbinger of future consumer prices, fell 5.9 percent year on year in December, unchanged from November and extending the downward trend to a 46th month. The index lost 5.2 percent for the whole of last year.
UBS Securities said the profit growth rate of all companies listed on China’s mainland would fall to minus 1 percent this year, due to falling consumption and deflationary pressures. The weakening yuan is also likely to add to the pessimism.
“The sharp depreciation of the RMB is perceived as a symptom of capital outflows which, in turn, have an impact on A-share market liquidity. All has been compounded by the uncertainties surrounding both the exit of the government’s stock market stabilization measures, and the prospect of rising supply of new shares under the registration-based IPO system.” said Gao Ting, head of China Strategy at UBS.
The latest round of sell-offs, together with the uncertainty in mainland market has cast a shadow over other Asian markets.
Australia’s main ASX 200 and South Korea’s Kospi Index both fell by 1.2 percent yesterday.
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