Liquidity crunch in focus as index falls
By Lydia Chen |
May 28, 2011, Saturday
|
Print Edition
Print Edition
SHANGHAI shares yesterday extended losses for a seventh day, with its key index posting the biggest weekly fall in 11 months, due to shortage of liquidity amid deepening investor concern over the country's slower growth and worsening inflation.
The Shanghai Composite Index fell 1 percent to 2,709.95. Turnover remained thin at 91.9 billion yuan (US$14.16 billion), indicating investors' reluctance to pour money into the stock market.
The index lost 5.2 percent this week, the biggest weekly drop since July 2.
"The continuous fall is mainly because liquidity in the market is getting tighter and tighter," said Liu Jun, deputy index investment officer at Huatai-Pinebridge Fund Management Co.
"Pessimism is widespread in the market right now," Liu added. "The repeated tumbles indicate that investors' concerns over companies' slower profit growth may be heightening."
Electricity producers were one of the biggest drags yesterday after Bloomberg News cited Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, as saying that China may have a power capacity shortage of 40 gigawatts this month and up to 60 gigawatts this summer.
The capacity shortfall will cut industrial output by 0.5 to 0.75 percentage point this year, Kowalczyk said in the report.
Sichuan Xichang Electric Power Co plunged 9.6 percent to 11.88 yuan.
Zuo Jianming, an analyst at Oriental Securities Co, cited the recent stake-raising move by the parent of market heavyweight PetroChina as an indication that securities supervisors do not want to see the market sliding further.
In an apparent move to spur prices, the state-owned China National Petroleum Corp bought 31.1 million yuan-denominated shares, equivalent to a 0.017 percent stake of PetroChina, to increase its share holding in the firm to 86.3 percent, PetroChina Co said on Thursday.
PetroChina rose 0.8 percent to 10.97 yuan yesterday. Shares in the company have fallen more than 7 percent in the past month.
The Shanghai Composite Index fell 1 percent to 2,709.95. Turnover remained thin at 91.9 billion yuan (US$14.16 billion), indicating investors' reluctance to pour money into the stock market.
The index lost 5.2 percent this week, the biggest weekly drop since July 2.
"The continuous fall is mainly because liquidity in the market is getting tighter and tighter," said Liu Jun, deputy index investment officer at Huatai-Pinebridge Fund Management Co.
"Pessimism is widespread in the market right now," Liu added. "The repeated tumbles indicate that investors' concerns over companies' slower profit growth may be heightening."
Electricity producers were one of the biggest drags yesterday after Bloomberg News cited Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, as saying that China may have a power capacity shortage of 40 gigawatts this month and up to 60 gigawatts this summer.
The capacity shortfall will cut industrial output by 0.5 to 0.75 percentage point this year, Kowalczyk said in the report.
Sichuan Xichang Electric Power Co plunged 9.6 percent to 11.88 yuan.
Zuo Jianming, an analyst at Oriental Securities Co, cited the recent stake-raising move by the parent of market heavyweight PetroChina as an indication that securities supervisors do not want to see the market sliding further.
In an apparent move to spur prices, the state-owned China National Petroleum Corp bought 31.1 million yuan-denominated shares, equivalent to a 0.017 percent stake of PetroChina, to increase its share holding in the firm to 86.3 percent, PetroChina Co said on Thursday.
PetroChina rose 0.8 percent to 10.97 yuan yesterday. Shares in the company have fallen more than 7 percent in the past month.
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