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Index falls the most in over 1 month
By Lydia Chen |
February 23, 2011, Wednesday
|
Print Edition
Print Edition
SHANGHAI'S key stock index yesterday fell the most in more than a month as it followed global markets, which fell on increasing concerns over the worsening situation in Libya, a major oil exporter.
The Shanghai Composite Index plunged 2.6 percent to 2,855.52 to notch its biggest daily loss since January 20 when the benchmark dived 2.9 percent. Turnover rose to 192 billion yuan (US$29.19 billion) from Monday's 146 billion yuan.
The market's plunge was also due to shrinking liquidity and profit taking after previous hefty gains, analysts said.
Investors are increasingly concerned the escalating crisis in Libya and other Middle East countries may push crude oil prices even higher, which will increase inflationary pressure in China, China Nature Asset Management Co said in a note yesterday.
Heavyweight chips PetroChina and Sinopec sank. PetroChina fell 1 percent to 11.59 yuan, and Sinopec plunged 5.7 percent to 8.74 yuan.
China relies on imports for more than half of its oil consumption. Libya, holder of the largest crude reserves in Africa, has already cut its daily oil production by 50,000 barrels because of the instability.
Meanwhile, tightening liquidity in the market also hindered its rise, said Chen Kaiwei, an analyst of Changjiang Securities.
China's weighted average seven-day government bond repurchase rate, the main barometer of short-term liquidity supply, jumped 18 basis points to 6.26 percent yesterday in Shanghai. The rate surged the most since at least 2004 on Monday after the central bank ordered lenders to set aside more money as reserves.
The reduced liquidity will be put under stress when Sinopec seeks to sell 23 billion yuan worth of convertible bonds today - the largest convertible bond issue in the Asia-Pacific region since late August.
"The market is now short of money, and it will face a correction for the rest of the week after previous gains," Chen said.
He added that shares may rise again till mid-March.
The Shanghai Composite Index plunged 2.6 percent to 2,855.52 to notch its biggest daily loss since January 20 when the benchmark dived 2.9 percent. Turnover rose to 192 billion yuan (US$29.19 billion) from Monday's 146 billion yuan.
The market's plunge was also due to shrinking liquidity and profit taking after previous hefty gains, analysts said.
Investors are increasingly concerned the escalating crisis in Libya and other Middle East countries may push crude oil prices even higher, which will increase inflationary pressure in China, China Nature Asset Management Co said in a note yesterday.
Heavyweight chips PetroChina and Sinopec sank. PetroChina fell 1 percent to 11.59 yuan, and Sinopec plunged 5.7 percent to 8.74 yuan.
China relies on imports for more than half of its oil consumption. Libya, holder of the largest crude reserves in Africa, has already cut its daily oil production by 50,000 barrels because of the instability.
Meanwhile, tightening liquidity in the market also hindered its rise, said Chen Kaiwei, an analyst of Changjiang Securities.
China's weighted average seven-day government bond repurchase rate, the main barometer of short-term liquidity supply, jumped 18 basis points to 6.26 percent yesterday in Shanghai. The rate surged the most since at least 2004 on Monday after the central bank ordered lenders to set aside more money as reserves.
The reduced liquidity will be put under stress when Sinopec seeks to sell 23 billion yuan worth of convertible bonds today - the largest convertible bond issue in the Asia-Pacific region since late August.
"The market is now short of money, and it will face a correction for the rest of the week after previous gains," Chen said.
He added that shares may rise again till mid-March.
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