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Shanghai shares in longest slump as liquidity fear lingers
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Shanghai stocks fell for the ninth consecutive day today, the longest losing streak for nearly two decades, due to market jitters about a cash crunch even though the central bank acted quickly to inject liquidity.
The benchmark Shanghai Composite Index sank 2.02 percent, or 43 points, to 2,084.79. Turnover was 72.2 billion yuan (US$11.8 billion) at the trading close.
The index ended 5.07 percent lower this week, the biggest weekly loss in more than two years.
“Tight liquidity is a main drag for the A-share market,” Shenyin & Wanguo Securities said today.
The People’s Bank of China made cash injection yesterday through short-term liquidity tools, but the central bank did not disclose the scale of the operation on its Weibo microblog.
However, the action failed to ease the worst liquidity crunch since June as the seven-day Shanghai Interbank Offered Rate, a gauge of funding costs, rose for the sixth straight day today by 118.20 basis points to 7.7 percent.
The rate was the highest since June when the country’s worst liquidity crunch in years sent the Shanghai Composite plunging 14 percent that month.
Zhang Zhiwei, chief economist for China at Nomura Holdings Inc, said the central bank’s move is likely to prevent the same liquidity squeeze as in June.
“We maintain the view that some defaults will emerge next year in local government financing vehicles, the corporate sector and non-banking financial institutions, such as trust companies,” Zhang added.
Lenders declined. China Minsheng Banking Corp Ltd fell 1.3 percent to 7.78 yuan. Industrial Bank Co Ltd sank 3.3 percent to 9.79 yuan.
Commodity shares tumbled over the US Federal Reserve’s decision to taper its bond-buying program.
Gold companies lost as the gold price fell 3.5 percent to a three-year low. Shandong Gold Mining Co Ltd dropped 5 percent to 17.43 yuan. Zhongjin Gold Corp Ltd slid 4 percent to 8.26 yuan. Zijin Mining Group Co Ltd, China’s largest gold miner, shed 2.6 percent to 2.27 yuan.
Oil producers also retreated. China Oilfield Services Ltd declined 8.9 percent to 20.44 yuan. Offshore Oil Engineering Co Ltd dropped 3.2 percent to 7.53 yuan.
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