Nervous investors see shares slide
Print Edition
CHINESE share prices fell again yesterday as investors remained nervous despite the central bank’s interest rate cuts the previous day.
The Shanghai Composite Index fell 1.27 percent to close at 2,927.29 points, after rising 4.3 percent in the afternoon session to turn around a 3.9 percent drop in the morning. The index has lost 23 percent since last Thursday, the start of the latest rout, and its market value has halved from its mid-June peak.
The Shenzhen Component Index sank 2.92 percent to 9,899.72 points.
The People’s Bank of China announced cuts in interest rates and reserve requirement ratios after the benchmark fell 7.63 percent on Tuesday.
Wendy Liu, an analyst at Nomura Securities Co, said: “It’s a much-needed boost to sentiment in the immediate term while the China Securities Regulatory Commission has stepped aside from stock market intervention since last briefing on market-saving moves in mid-August.
“But the easing move would only lift the market sentiment from an extremely short-term oversold position.”
All 16 listed banks in Shanghai and Shenzhen saw their stock rise.
Automakers also rose because of the rates cut, on the expectation of cheaper borrowing.
Shanghai-listed China Merchants Bank rose 9.38 percent. Shenzhen-listed BYD Co, the Chinese carmaker part-owned by Warren Buffett’s Berkshire Hathaway Inc, jumped by the 10 percent daily limit to 44.37 yuan (US$6.92).
However, small capital stocks still suffered under selling pressure as Shenzhen’s start-up board ChiNext tumbled 4.3 percent and the CSI500 index that tracks small listed companies declined 3.8 percent.
Xie Dongming, an analyst at Treasury Research and Strategy with OCBC Bank, said the latest monetary easing steps came against the rising pressures of the yuan’s depreciation, which may create more pressure for capital outflows that influence the equity market.
“The market’s mood swings are going to last for a while, since investors need time to re-evaluate the ability of government’s interference,” Xie said.
Sinolink Securities Co analyst Li Lifeng said there is also growing concern about a new round of margin calls.
“Some investors bought shares with loans that used equities pledged as collateral. If the market slump continues, it would trigger a chain reaction of sell-offs of those investments and the value of it could reach several trillion yuan, which we should keep an eye on,” Li said.
Other Asian stocks climbed yesterday, with Japan’s Topix index up 3.2 percent to post its biggest rally since October, Australia’s S&P/ASX 200 Index rose 0.7 percent and South Korea’s Kospi index was up 2.6 percent.
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