Rail shares bear brunt as index plummets
By Lydia Chen |
July 26, 2011, Tuesday
|
Print Edition
Print Edition
SHANGHAI'S stock market yesterday plunged by the biggest amount in more than six months, with railway-related shares driving the benchmark index down following Saturday's bullet train crash.
Stalled US talks over its debt limit also cast a shadow over local shares.
The Shanghai Composite Index tumbled 3 percent to 2,688.75 - the biggest daily fall since January 17 when the index dived 3.03 percent.
"The train crash may trigger an investment cut in railway construction," said Tu Jun, a strategist at Shanghai Securities Co. "And the failure to reach agreement on the US federal debt limit is hurting investors' confidence in the economic recovery."
"All the weekend news was bad for stocks," Tu added.
Railway shares were worst hit, as investors began panic selling after the fatal collision in Wenzhou City, Zhejiang Province, that prompted the government to order a safety inspection.
The value of CSR Corp and China CNR Corp, the country's biggest train makers, fell by almost 10 percent.
CSR dropped 8.9 percent to 6.04 yuan (US$0.93), its lowest close since October 29. China CNR Corp shares plunged 9.7 percent to 5.87 yuan, the biggest fall since its listing in December 2009.
The tragedy, however, drove up airline share prices as a report by Barclays Plc said the train crash will spur demand for alternative transport.
China Eastern Airlines, the country's second-largest carrier, gained 1.2 percent to close at 5.09 yuan in Shanghai.
Meanwhile, US politicians' failure to reach an agreement on raising the country's federal debt limit over the weekend could place pressure on China's stock market, at least in the short term, as China's record US$3.2 trillion foreign exchange reserves include as much as 70 percent in US dollar assets, said Huang Dongsheng, an analyst at Guodu Securities Co.
However, Xia Bin, a member of the monetary policy committee of China's central bank, said yesterday that China should not worry about the stalled US debt talks as Washington has little choice but to continue pursuing a loose monetary policy in a bid to invigorate the world's biggest economy.
PetroChina Co, the nation's largest oil producer, lost 2.1 percent, down to 10.36 yuan, its lowest close since September 30.
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