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Shanghai index drops to lowest in 3 weeks
By Lydia Chen |
April 25, 2011, Monday
|
Online Edition
Online Edition
SHARES in Shanghai plunged today, pulling the key stock index to the lowest in three weeks as inflation concerns are building up in the market.
The Shanghai Composite Index lost 1.51 percent to 2,964.95. Turnover remained thin at 140.5 billion yuan (US$ 21.62 billion).
Blue caps in such sectors as cement, iron and steel were hit badly under the gloomy inflation outlook while consumption-related stocks such as wine, retail and medical equipment outperformed the market.
Yanzhou Coal Mining Co shed 4.84 percent to 33.79 yuan. Xinjiang Bayi Iron& Steel Co tumbled 6.90 percent to 13.89 yuan.
China's inflation will hit between 4.9 and 5.1 percent year on year in the second quarter, Xu Lianzhong, an official with the National Development and Reform Commission has said.
The country still faces grave inflationary pressures caused mainly by rising costs of production, which pushed up the prices of food, commodities and services, Xu said.
Today's across-board sell-off was also triggered by worries that China may allow more new listings into the markets as a way to drain excessive liquidity that was blamed as a main reason behind the stubbornly high inflation, according to Huang Dongsheng, an analyst with Guodu Securities Co.
Companies now may only need to wait half a year to realize issuing public offerings as China Securities Regulatory Commission has recently sharply sped up its approval process, Shanghai Securities News cited unnamed sources as saying.
Shen Xiaochun, an analyst with Guohai Liangshi Futures Co, perceived the expected market expansion as a sign indicating regulators' intention to use more financing measures to control liquidity after monetary tools such as bank credit control and interest rate hike proved not enough.
"Authorities are now hoping financing tools could be of help to relieve some inflationary pressure," Shen said. "Repeated monetary tools can hurt banks' profits and increase companies' borrowing costs. So it makes sense that financing might be a better choice."
China's efforts to curb in lending have been compromised as many banks now use lightly-regulated tools such as trust firms to move loans off their books, which means a large chunk of liquidity is out of the central bank's control.
The Shanghai Composite Index lost 1.51 percent to 2,964.95. Turnover remained thin at 140.5 billion yuan (US$ 21.62 billion).
Blue caps in such sectors as cement, iron and steel were hit badly under the gloomy inflation outlook while consumption-related stocks such as wine, retail and medical equipment outperformed the market.
Yanzhou Coal Mining Co shed 4.84 percent to 33.79 yuan. Xinjiang Bayi Iron& Steel Co tumbled 6.90 percent to 13.89 yuan.
China's inflation will hit between 4.9 and 5.1 percent year on year in the second quarter, Xu Lianzhong, an official with the National Development and Reform Commission has said.
The country still faces grave inflationary pressures caused mainly by rising costs of production, which pushed up the prices of food, commodities and services, Xu said.
Today's across-board sell-off was also triggered by worries that China may allow more new listings into the markets as a way to drain excessive liquidity that was blamed as a main reason behind the stubbornly high inflation, according to Huang Dongsheng, an analyst with Guodu Securities Co.
Companies now may only need to wait half a year to realize issuing public offerings as China Securities Regulatory Commission has recently sharply sped up its approval process, Shanghai Securities News cited unnamed sources as saying.
Shen Xiaochun, an analyst with Guohai Liangshi Futures Co, perceived the expected market expansion as a sign indicating regulators' intention to use more financing measures to control liquidity after monetary tools such as bank credit control and interest rate hike proved not enough.
"Authorities are now hoping financing tools could be of help to relieve some inflationary pressure," Shen said. "Repeated monetary tools can hurt banks' profits and increase companies' borrowing costs. So it makes sense that financing might be a better choice."
China's efforts to curb in lending have been compromised as many banks now use lightly-regulated tools such as trust firms to move loans off their books, which means a large chunk of liquidity is out of the central bank's control.
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