Market fall worst in 14 months
By Ding Yining and Richard Fu |
01:51 UTC+8 November 13, 2010
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Print Edition
Print Edition
SHANGHAI'S stock market yesterday experienced its biggest fall in 14 months and ended the week below 3,000 points.
The slump came as commodity producers and financial shares fell, amid concerns that the government may step up measures to curb surging consumer prices.
"Market liquidity has been high since October and fund management companies have become heavily positioned in the last few months and may take this chance to dump some of their stock portfolio," Haitong Securities' analyst Zhang Qi said.
Media reports say some lenders may have to increase reserve ratio by an additional 50 basis points from next Tuesday. The central bank already ordered a 50 basis points rate hike on Wednesday to drain liquidity. The Bank of Communications and China Everbright Bank are among the banks facing the extra reserve ratio increase for three months, the 21st Century Business Herald reported yesterday, citing unidentified sources.
The benchmark Shanghai Composite Index tumbled 5.16 percent, or 162.31 points, to close at 2,985.43 points. Turnover grew to 298 billion yuan (US$45 billion) from Thursday's 287 million yuan. A total of 844 shares fell, while only 37 added and 39 remained unchanged. The weekly loss stood at 4.6 percent.
The most active November contract for the index future, which is based on the CSI 300 index, slumped 7.31 percent to 3,287 points.
The Shenzhen Composite Index, which tracks the smaller market on Chinese mainland, retreated 6.12 percent to 1,296.95 points.
Hang Seng Index lost 1.93 percent to 24,222.58 points.
In Shanghai, the Industrial Bank fell 6.45 percent to 25.81 yuan; Everbright Bank dropped 8.46 percent to 4.33 yuan; China Life Insurance Co lowered 5.30 percent to 24.31 yuan; The Industrial and Commercial Bank of China was down 1.89 percent to 4.68 yuan.
"The government is determined to curb inflation and prevent asset bubbles. There may be another interest rate rise before the end of the year," China International Capital Corporation said in a research note.
"Investors are concerned about a tighter monetary policy and the index will go through adjustment in the next few days," the CICC report said.
The property sector dragged down the index amid concern about the clampdown on property speculation. China Vanke Co dived 7.09 percent to 8.53 yuan. Shanghai AJ Corporation fell 8.14 percent to 10.04 yuan.
Most commodity contracts in China also tumbled by their exchange-set daily limits yesterday, on concerns that more tightening may curb demand. Analysts attributed panic selling to profit taking after the recent rally in commodity markets.
On the Shanghai Futures Exchange, copper and zinc for February delivery fell 5 percent to 65,640 yuan a ton and 19,935 yuan a ton respectively.
Cotton for May delivery on the Zhengzhou Commodity Exchange slid by the 7.5 percent limit to 29,290 yuan a ton while September soybeans on the Dalian Commodity Exchange dropped the maximum allowable 4 percent to 4,584 yuan a ton.
The government has sold state stockpiles of cotton, sugar, aluminum and zinc to suppress prices and contain inflation, and analysts say more state sales are expected.
The slump came as commodity producers and financial shares fell, amid concerns that the government may step up measures to curb surging consumer prices.
"Market liquidity has been high since October and fund management companies have become heavily positioned in the last few months and may take this chance to dump some of their stock portfolio," Haitong Securities' analyst Zhang Qi said.
Media reports say some lenders may have to increase reserve ratio by an additional 50 basis points from next Tuesday. The central bank already ordered a 50 basis points rate hike on Wednesday to drain liquidity. The Bank of Communications and China Everbright Bank are among the banks facing the extra reserve ratio increase for three months, the 21st Century Business Herald reported yesterday, citing unidentified sources.
The benchmark Shanghai Composite Index tumbled 5.16 percent, or 162.31 points, to close at 2,985.43 points. Turnover grew to 298 billion yuan (US$45 billion) from Thursday's 287 million yuan. A total of 844 shares fell, while only 37 added and 39 remained unchanged. The weekly loss stood at 4.6 percent.
The most active November contract for the index future, which is based on the CSI 300 index, slumped 7.31 percent to 3,287 points.
The Shenzhen Composite Index, which tracks the smaller market on Chinese mainland, retreated 6.12 percent to 1,296.95 points.
Hang Seng Index lost 1.93 percent to 24,222.58 points.
In Shanghai, the Industrial Bank fell 6.45 percent to 25.81 yuan; Everbright Bank dropped 8.46 percent to 4.33 yuan; China Life Insurance Co lowered 5.30 percent to 24.31 yuan; The Industrial and Commercial Bank of China was down 1.89 percent to 4.68 yuan.
"The government is determined to curb inflation and prevent asset bubbles. There may be another interest rate rise before the end of the year," China International Capital Corporation said in a research note.
"Investors are concerned about a tighter monetary policy and the index will go through adjustment in the next few days," the CICC report said.
The property sector dragged down the index amid concern about the clampdown on property speculation. China Vanke Co dived 7.09 percent to 8.53 yuan. Shanghai AJ Corporation fell 8.14 percent to 10.04 yuan.
Most commodity contracts in China also tumbled by their exchange-set daily limits yesterday, on concerns that more tightening may curb demand. Analysts attributed panic selling to profit taking after the recent rally in commodity markets.
On the Shanghai Futures Exchange, copper and zinc for February delivery fell 5 percent to 65,640 yuan a ton and 19,935 yuan a ton respectively.
Cotton for May delivery on the Zhengzhou Commodity Exchange slid by the 7.5 percent limit to 29,290 yuan a ton while September soybeans on the Dalian Commodity Exchange dropped the maximum allowable 4 percent to 4,584 yuan a ton.
The government has sold state stockpiles of cotton, sugar, aluminum and zinc to suppress prices and contain inflation, and analysts say more state sales are expected.
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