Shares plummet most in 3 weeks
Print Edition
SHANGHAI stocks posted its worst slump in three weeks yesterday after investors became worried over speculation the Chinese government may ease support, leading to a drop in trading sentiment.
The Shanghai Composite Index tumbled 6.15 percent to 3,748.16 points. It was the biggest one-day drop since July 27, when it plunged 8.48 percent — its sharpest fall in eight years.
The index briefly broke above 4,000 points yesterday, but failed to hold above the symbolic mark.
“The market is facing lots of pressure near 4,000 points, and the upward momentum was not strong enough to push it through. So some investors took profits because they are afraid,” said Zheshang Securities analyst Zhang Yanbing.
Although the China Securities Regulatory Commission said on Friday that the China Securities Finance Corp (CSF) will hold stocks over the long term in a bid to stabilize the market, some investors were still skeptical that would be enough to support equities.
Shenwan Hongyuan Securities said the main message behind the CSRC’s statement is to emphasize that the role of the CSF is to try and ward off volatility as a provider of stability.
Steve Wang, chief China economist at Reorient Financial Markets Ltd in Hong Kong, told Bloomberg News: “The CSF has become a main player in this market so everyone is watching it. People panic when it stops buying.”
The CSF is now the shareholder of 35 listed companies which achieved an average share increase of around 55 percent between July 9 when the key index hit an “abyss” low and the market close on Monday.
However, most of the 35 companies fell yesterday. China Railway Group Ltd tumbled by the daily 10 percent limit to 13.37 yuan (US$2.09). Inner Mongolia Yili Industrial Group Co lost 7.64 percent to 17.04 yuan.
A surprise yuan devaluation last week also added to worries over a capital outflow.
Facing tight liquidity, the People’s Bank of China yesterday pumped 120 billion yuan in seven-day reverse-repurchase agreements into the country’s money market, which state media said was the largest single-day cash injection since January 2014.
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