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December 31, 2016

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Shanghai shares see biggest annual fall since 2011

SHANGHAI shares rose yesterday on the last trading day of 2016, but the benchmark index ended the year 12.3 percent lower — its biggest annual drop since 2011.

Brokers, however, are mildly optimistic about trading next year despite challenges such as a stronger US dollar, weakening yuan and rising inflation.

The Shanghai Composite Index added 0.24 percent to close at 3,103.64 points.

Kweichow Moutai Co added 2.09 percent to 334.15 yuan (US$48.14), while Jiangsu Wujin Stainless Steel Pipe Group Co gained 3.12 percent to 40 yuan to be one of the biggest gainers of the day.

The Shanghai index’s performance was among the worst of more than 40 other global indices in 2016, according to Wall Street Journal’s Market Data Center, compared with gains of 0.6 percent for Hong Kong’s Hang Seng Index and 0.4 percent for Japan’s Nikkei 225.

The Chinese mainland’s A-share market started in January with a “circuit breaker” mechanism that triggered massive sell-offs in the first week of trading. The mechanism, which automatically suspended stock trading if prices plunged, was suspended by the China Securities Regulatory Commission four days after it took effect.

Still, brokers are mildly optimistic about the stock market next year but cautioned about market uncertainties.

Hong Hao, chief strategist at BoCom International, projects the benchmark index in 2017 within the range of 2,800 to 3,800 points.

Next year “is destined to be a year of epic changes and volatility,” Hong said in a recent report. “We see a strengthening US dollar, rising inflation as well as a weakening yuan.”

Hong added that the market should take caution over the falling yuan that would eventually roil other asset prices such as equities.

The depreciating yuan has driven investors abroad in search of assets to hedge the risks, analysts said.

It also made foreign investors less optimistic about mainland companies, even after the launch of a long-awaited stock connect between Shenzhen and Hong Kong earlier this month, said Gao Ting, a strategist for A shares at UBS Securities.


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