Shares’ biggest daily loss in 5 years
Print Edition
SHANGHAI stocks suffered their biggest daily loss in five years yesterday as capital left banks and brokerages in a round of massive profit-taking, a day after the benchmark composite index broke the 3,000 mark for the first time in more than three years.
The Shanghai Composite Index lost 5.43 percent to 2,856.27 points. The loss was the steepest decline since August 31, 2009, when the index slumped 6.74 percent.
The smaller Shenzhen Component Index lost 4.15 percent to 10,116.49 points.
Total transactions of both markets hit a record 1.24 trillion yuan (US$200 billion), the highest since the exchanges began trading in the early 1990s.
Investors took profits yesterday after authorities announced a new rule late Monday tightening the use of corporate bonds in a bid to better manage local government’s debt and reduce risk in companies’ bond repurchases.
Gains over the past fortnight had been stimulated mainly by capital flow rather than the real economy, as investors were lured by increasing optimism in the A-share markets, analysts said.
Huatai Securities said the huge decline in the banking sector proved volatile as the record-breaking trading amount showed institutional investors played a key part in profit-taking.
Hua Xia Bank lost 9.98 percent to 10.82 yuan, China Minsheng Banking fell 9.85 percent to 8.33 yuan, Bank Of Communications shed 9.68 percent to 5.69 yuan.
China Securities Depository and Clearing Corp said its decision to temporarily stop accepting new bond repurchase applications would not have a “huge” effect on the stock market, as the two run separately in terms of investor type and capital preference. Yet Cinda Securities said that given brokerages are the major buyers of urban construction investment bonds, the limitation on bond repurchases would affect the profitability of brokerages for a short period.
Northeast Securities lost 9.98 percent to 18.85 yuan, Sinolink Securities fell 9.87 percent to 21.27 yuan, Soochow Securities shed 9.52 percent to 20.82 yuan.
Also on Monday, Xinhua news agency warned: “For individual investors, who significantly outnumber institutional investors in domestic exchanges, greed now appears to triumph over fear, with an extraordinary, if not maniacal, numbers of new account openings and purchases that had not been seen for years.
“The problem with a momentum market, however, is that one can’t tell when the tide will turn ... the red-hot market is rocketing a bit too fast,” it said.
The Hang Seng Index was also hit by profit-taking and a slump in energy firms as oil prices hit five-year lows, AFP reported.
Crude was hit by OPEC’s decision last month to maintain output levels despite a supply glut, while a strong dollar and economic weakness in China, Japan and the eurozone also pushed down prices.
US benchmark West Texas Intermediate for January delivery fell 26 cents to US$62.79 while Brent eased 69 cents to US$65.50.
In Hong Kong, PetroChina fell 3.29 percent to HK$8.24 (US$1.06) and CNOOC shed 4.37 percent to HK$8.24.
Wall Street provided a soft lead, with the Dow falling 0.59 percent and the S&P 500 down 0.73 percent — both down from record highs — while the Nasdaq was off by 0.84 percent, AFP said.
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