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Shanghai shares drop on jitter about tight liquidity
By Feng Jianmin |
August 30, 2011, Tuesday
|
Online Edition
Online Edition
SHANGHAI'S key stock index fell for the third day on concerns that continuous tightening measures may drain liquidity and threat profitability of small firms.
The benchmark Shanghai Composite Index edged down 0.38 percent to 2,566.59 points after rising as much as 1.5 percent in the morning session, taking cue from strong performance of the US stock market on encouraging consumer data. Turnover rose to 79.5 billion yuan (US$6.62 billion) from Monday's 78.4 billion yuan.
Concerns that China's central bank will not loosen its monetary policy intensified after China's top economic planning body, the National Development and Reform Commission, said in a report that the price level in China will remain high amid excessive global liquidity and natural disasters in China.
"Sluggish economic growth in Japan and debt problems in the US and Europe will also impact China's economy from a variety of aspects," the report said.
Meanwhile, market liquidity was tightened as banks are required to hand in more money as reserves starting September 5. The central bank notified commercial banks on August 26 to include margin deposits in the requirements, which is expected to drain 900 billion yuan from the economy.
"The news to expand basis of reserves continued to impact the market and we expect tight liquidity will stay," said Cao Xuefeng, an analyst with Huaxi Securities.
Smaller firms led the decliners on concerns that tighter credit will make it harder for smaller companies to borrow money for expansion, curbing their earnings prospects.
Valuations for small-caps have "sizeable" room for declines as 79 percent of companies listed on ChiNext, a Chinese equivalent of Nasdaq, may trail profit forecasts this year while the percentage for Shenzhen's small and medium size board companies is likely to be 46 percent, Tang Chuan, an analyst at Citic Securities, wrote in a report yesterday.
Harbin Gloria Pharmaceuticals Co dropped 6.8 percent to 26.20 yuan.
China Construction Bank rose 0.7 percent to 4.53 yuan after the Bank of America Corp agreed to sell 13.1 billion shares for US$8.3 billion.
The benchmark Shanghai Composite Index edged down 0.38 percent to 2,566.59 points after rising as much as 1.5 percent in the morning session, taking cue from strong performance of the US stock market on encouraging consumer data. Turnover rose to 79.5 billion yuan (US$6.62 billion) from Monday's 78.4 billion yuan.
Concerns that China's central bank will not loosen its monetary policy intensified after China's top economic planning body, the National Development and Reform Commission, said in a report that the price level in China will remain high amid excessive global liquidity and natural disasters in China.
"Sluggish economic growth in Japan and debt problems in the US and Europe will also impact China's economy from a variety of aspects," the report said.
Meanwhile, market liquidity was tightened as banks are required to hand in more money as reserves starting September 5. The central bank notified commercial banks on August 26 to include margin deposits in the requirements, which is expected to drain 900 billion yuan from the economy.
"The news to expand basis of reserves continued to impact the market and we expect tight liquidity will stay," said Cao Xuefeng, an analyst with Huaxi Securities.
Smaller firms led the decliners on concerns that tighter credit will make it harder for smaller companies to borrow money for expansion, curbing their earnings prospects.
Valuations for small-caps have "sizeable" room for declines as 79 percent of companies listed on ChiNext, a Chinese equivalent of Nasdaq, may trail profit forecasts this year while the percentage for Shenzhen's small and medium size board companies is likely to be 46 percent, Tang Chuan, an analyst at Citic Securities, wrote in a report yesterday.
Harbin Gloria Pharmaceuticals Co dropped 6.8 percent to 26.20 yuan.
China Construction Bank rose 0.7 percent to 4.53 yuan after the Bank of America Corp agreed to sell 13.1 billion shares for US$8.3 billion.
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