Data cause index to suffer biggest daily fall in 4 months
By Feng Jianmin |
May 24, 2011, Tuesday
|
Print Edition
Print Edition
SHANGHAI'S key stock index yesterday suffered its biggest daily drop in four months after a survey showed China's manufacturing growth in May may be the slowest in 10 months.
The plunge, sending the gauge to its lowest level in three months and a half, was also partly attributed to news that China is to quicken the pace of the launch of its international board, fanning concerns about liquidity.
The Shanghai Composite Index lost 2.9 percent to 2,774.57, the largest daily decline since January 17.
A preliminary reading of the Purchasing Managers' Index was 51.1, the lowest in 10 months, HSBC Holdings Plc and Markit Economics said yesterday. That compared with a final reading of 51.8 in April.
HSBC will release the final reading for May on June 1.
"The impact of tightening measures on economy and company performances is emerging," said Kou Wenhong, an analyst at China Nature Asset Management Co. "Recent droughts and shortage of power aggravated concerns that the slowdown of economic growth will worsen."
Kou predicted the market may not stumble again but a large rebound was not likely until late June, when inflation is expected to ease.
Shang Fulin, chairman of the China Securities Regulatory Commission said on Friday that an "international board is coming closer and closer."
Morgan Stanley Huaxin Funds Management Co said in a report the launch of the international board is widely seen as a negative factor.
"The new board will certainly divert current capital, and the companies expected to be listed on the board will add pressure to the overpriced shares on the market," it said.
Analysts recommended buying consumption related shares and blue chips with low valuations.
Steel firms led the decliners after data by the China Iron and Steel Association showed that both steel prices and demand fell last week amid the impact of tightening measures.
Inner Mongolian Baotou Steel Union Co slid 7.3 percent to 6.89 yuan. Baoshan Iron and Steel Co lost 2.9 percent to 6.41 yuan.
But Qiao Peitao, an analyst at Greatwall Securities, said the correction was overdone and the decline would be temporary.
Thermal power plants fell as growing coal prices eroded companies' profits and caused a nationwide shortage of electricity supply.
The plunge, sending the gauge to its lowest level in three months and a half, was also partly attributed to news that China is to quicken the pace of the launch of its international board, fanning concerns about liquidity.
The Shanghai Composite Index lost 2.9 percent to 2,774.57, the largest daily decline since January 17.
A preliminary reading of the Purchasing Managers' Index was 51.1, the lowest in 10 months, HSBC Holdings Plc and Markit Economics said yesterday. That compared with a final reading of 51.8 in April.
HSBC will release the final reading for May on June 1.
"The impact of tightening measures on economy and company performances is emerging," said Kou Wenhong, an analyst at China Nature Asset Management Co. "Recent droughts and shortage of power aggravated concerns that the slowdown of economic growth will worsen."
Kou predicted the market may not stumble again but a large rebound was not likely until late June, when inflation is expected to ease.
Shang Fulin, chairman of the China Securities Regulatory Commission said on Friday that an "international board is coming closer and closer."
Morgan Stanley Huaxin Funds Management Co said in a report the launch of the international board is widely seen as a negative factor.
"The new board will certainly divert current capital, and the companies expected to be listed on the board will add pressure to the overpriced shares on the market," it said.
Analysts recommended buying consumption related shares and blue chips with low valuations.
Steel firms led the decliners after data by the China Iron and Steel Association showed that both steel prices and demand fell last week amid the impact of tightening measures.
Inner Mongolian Baotou Steel Union Co slid 7.3 percent to 6.89 yuan. Baoshan Iron and Steel Co lost 2.9 percent to 6.41 yuan.
But Qiao Peitao, an analyst at Greatwall Securities, said the correction was overdone and the decline would be temporary.
Thermal power plants fell as growing coal prices eroded companies' profits and caused a nationwide shortage of electricity supply.
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