Shares plunge despite central bank’s rate trim
Print Edition
SHANGHAI stocks plunged yesterday after a roller coaster ride, despite a surprise rate cut by China’s central bank. Investors were also not impressed by the securities regulator’s optimism over margin trading.
The Shanghai Composite Index tumbled 3.34 percent to 4,053.03 points, extending declines from its June 12 peak to more than 20 percent.
The index swung between a loss of 7.6 percent and a gain of 2.5 percent in yesterday’s trading, posting the biggest intraday point move since 1992.
The People’s Bank of China on Saturday announced cuts in the reserve requirement ratio and interest rates. The cuts were effective on Sunday.
The rate cut brings the benchmark one-year bank lending rate to 4.85 percent and the one-year deposit rate to 2 percent.
Nomura Securities estimated the RRR cut to inject about 650 billion yuan (US$105 billion) of liquidity into the banking system and the rate cut might lower the interbank rate as well as financing costs in the economy.
However, liquidity may tighten as initial public offerings of 10 companies will open for subscriptions on Friday.
Regulators were considering suspending IPOs to stabilize markets, Bloomberg News quoted people familiar with the matter as saying.
Shares of trading companies tumbled, with Shanghai Jinqiao Export Processing Zone Development Co, Nanjing Textiles Import & Export Corp and Guangdong Mingzhu Group Co all plunging by the daily 10 percent limit to 23.21 yuan, 112.75 yuan and 16.72 yuan respectively.
The China Securities Regulatory Commission yesterday expressed optimism that despite recent big falls, margin trading could still rise. It added that its drafting of stricter margin trading rules is aimed at leveraging the market, controlling risks and promoting self-discipline among investors.
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