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Shanghai index falls as credit default fears rise
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SHANGHAI stocks declined today amid growing fears about credit defaults after a listed solar company said it won’t be able to repay interest on a corporate bond.
The benchmark Shanghai Composite Index lost 0.89 percent, or 18.39 points, to 2,053.08. Turnover was 91.6 billion yuan (US$15 billion) by the trading close.
Shanghai Chaori Solar Energy Science & Technology Co Ltd, a manufacturer of solar cell components, said it won’t be able to pay interest of 89.8 million yuan on a 1 billion yuan bond issued in March 2012.
The payment is due on Friday but the company will only be able to pay 4 million yuan due to “uncontrollable factors,” Chaori Solar said in a filing to the Shenzhen Stock Exchange late yesterday.
Trading in Chaori Solar shares has been suspended since February 19.
“The default by Chaori increased market uncertainty and is negative for the A-share market in the short term,” Ping An Securities said in a note today.
“Credit risk is mounting as a large number of bonds and trust products related to the steel, metal and coal sectors will mature in the second quarter,” the brokerage said.
The market decline also came after the central government set an annual economic growth goal of 7.5 percent for 2014, unchanged from last year's target.
Premier Li Keqiang announced economic targets for 2014 at the opening of the annual session of the National People’s Congress in Beijing this morning. He stressed that reforms will be the top priority. China’s economy expanded 7.7 percent last year.
The government also aims for an inflation rate of 3.5 percent this year and 13 percent growth in the M2, a broad measure of money supply. Both targets are unchanged from last year.
Financial shares were among the biggest decliners. China Minsheng Banking Corp Ltd lost 2.3 percent to 7.54 yuan. Bank Of Beijing Co Ltd fell 2.7 percent to close at 7.31 yuan.
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