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Shanghai index tumbles amid global market debacle
By Feng Jianmin |
August 5, 2011, Friday
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Online Edition
Online Edition
China's benchmark stock index fell the most in 9 days today among tumbles of neighboring Asian markets, taking cues from slumps in Western markets, on concerns that the central bank will take action against recent loose liquidity.
The benchmark Shanghai Composite Index fell 2.15 percent after dropping as much as 3 percent in the morning. The index closed at 2,624.42 points, the lowest since June 20. Turnover rose to 88.9 billion yuan (US$13.8 billion) from yesterday's 69.7 billion yuan. Nearly 90 percent of the stocks dropped.
The Shenzhen Component Index, which tracks the smaller market on the mainland, similarly lost 1.95 percent to 11,701.8 points.
Markets worldwide were on edge over fiscal weakness in Italy and Spain and the eurozone's ability to contain more crisis, as the two countries' borrowing costs surged in recent days.
Hong Kong's Hang Seng Index slumped 5.6 percent, set for the biggest plunge since November 2008, while Japan's Nikkei 225 Stock Average and South Korea's Kospi index both sank slipped 3.7 percent.
The Dow Jones Industrial Average plunged 4.3 percent yesterday, its worst one-day drop since the financial crisis, the US Labor Department reported that weekly claims for unemployment benefits remained at a high 400,000 last week, as business and government layoffs persisted while new job creation remained sluggish. The Stoxx Europe 600 Index, plummeted 3.4 percent to its lowest since 2010 July.
"Worries for slowdown world economy intensified after yields for Italian and Spanish bond exceed 6 percent, and after US reported high unemployment rate." said Wen Lijun, an analyst with Nanjing Securities. "Investors are also cautious before China's major official economic data which will be released on August 9. There are increasing expectations that the central bank may raise the interest rates next week."
In China, concerns that China's central bank may take more tightening measures rise against recent easing liquidity and expectations for fast inflation in July. China's central bank said on Monday that it will not relax monetary policy in the second half of the year as the battle against inflation and property speculation continues.
China's liquidity improved as the central bank injected 44 billion yuan to the economy this week, which caused net addition in liquidity for the third consecutive week. The benchmark money rate fell for the fifth day to 3.01 percent today, the lowest in two months.
Analysts with Guotai Junan Securities and Guohai Securities estimated that consumer price index in July is between 6.2 percent to 6.4 percent, while the Industrial Bank and Soochow Securities said the index may reach 6.5 to 6.7 percent, higher than a 32-month record of 6.4 in June.
"The monetary policy will not ease in the second half of the year, except for some structural changes such as increasing lending to medium and small sized enterprises, affordable housing, and water projects," said Wu Tao, a "You cannot expect for market growth on looser policies."
Commodity producers led the decliners after prices of oil and aluminum futures dropped. Oil fell 5.8 percent in New York yesterday, while aluminum futures in China dropped 4 percent.
"A stronger dollar and weaker European equity markets have weighed on the complex, while Italian and Spanish bond yields remain near euro-era records, indicating the level of ongoing concern over the European debt situation," the Standard Bank wrote in a note. "The oil market is much more vulnerable to a big fall if the only main support is hope of further stimulus from monetary policies."
Aluminium Corp of China tumbled 3 percent to 9.94 yuan. PetroChina, the largest oil producer in China, dropped 2.5 percent to 10.19 yuan.
The benchmark Shanghai Composite Index fell 2.15 percent after dropping as much as 3 percent in the morning. The index closed at 2,624.42 points, the lowest since June 20. Turnover rose to 88.9 billion yuan (US$13.8 billion) from yesterday's 69.7 billion yuan. Nearly 90 percent of the stocks dropped.
The Shenzhen Component Index, which tracks the smaller market on the mainland, similarly lost 1.95 percent to 11,701.8 points.
Markets worldwide were on edge over fiscal weakness in Italy and Spain and the eurozone's ability to contain more crisis, as the two countries' borrowing costs surged in recent days.
Hong Kong's Hang Seng Index slumped 5.6 percent, set for the biggest plunge since November 2008, while Japan's Nikkei 225 Stock Average and South Korea's Kospi index both sank slipped 3.7 percent.
The Dow Jones Industrial Average plunged 4.3 percent yesterday, its worst one-day drop since the financial crisis, the US Labor Department reported that weekly claims for unemployment benefits remained at a high 400,000 last week, as business and government layoffs persisted while new job creation remained sluggish. The Stoxx Europe 600 Index, plummeted 3.4 percent to its lowest since 2010 July.
"Worries for slowdown world economy intensified after yields for Italian and Spanish bond exceed 6 percent, and after US reported high unemployment rate." said Wen Lijun, an analyst with Nanjing Securities. "Investors are also cautious before China's major official economic data which will be released on August 9. There are increasing expectations that the central bank may raise the interest rates next week."
In China, concerns that China's central bank may take more tightening measures rise against recent easing liquidity and expectations for fast inflation in July. China's central bank said on Monday that it will not relax monetary policy in the second half of the year as the battle against inflation and property speculation continues.
China's liquidity improved as the central bank injected 44 billion yuan to the economy this week, which caused net addition in liquidity for the third consecutive week. The benchmark money rate fell for the fifth day to 3.01 percent today, the lowest in two months.
Analysts with Guotai Junan Securities and Guohai Securities estimated that consumer price index in July is between 6.2 percent to 6.4 percent, while the Industrial Bank and Soochow Securities said the index may reach 6.5 to 6.7 percent, higher than a 32-month record of 6.4 in June.
"The monetary policy will not ease in the second half of the year, except for some structural changes such as increasing lending to medium and small sized enterprises, affordable housing, and water projects," said Wu Tao, a "You cannot expect for market growth on looser policies."
Commodity producers led the decliners after prices of oil and aluminum futures dropped. Oil fell 5.8 percent in New York yesterday, while aluminum futures in China dropped 4 percent.
"A stronger dollar and weaker European equity markets have weighed on the complex, while Italian and Spanish bond yields remain near euro-era records, indicating the level of ongoing concern over the European debt situation," the Standard Bank wrote in a note. "The oil market is much more vulnerable to a big fall if the only main support is hope of further stimulus from monetary policies."
Aluminium Corp of China tumbled 3 percent to 9.94 yuan. PetroChina, the largest oil producer in China, dropped 2.5 percent to 10.19 yuan.
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