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Stocks retreat over factory slowdown, liquidity fears
By Ye Zhen |
July 24, 2013, Wednesday
|
Online Edition
Online Edition
SHANGHAI stocks retreated today after a report signaled China's manufacturing activity may have slowed for a fourth straight month to the lowest in 11 months, while fears over a liquidity crunch reignited after lending rates in the interbank market rose for a sixth day in a row.
A wide sell-off in heavily weighted stocks dragged the market down, with the key Shanghai Composite Index ending 0.52 percent lower to settle at 2,033.33 points. Daily turnover was 93.7 billion yuan (US$15.4 billion).
The market pared a slump of as much as 1.6 percent in early trading thanks to a rebound in small-cap shares of media companies, environmental-protection firms and IT enterprises.
HSBC's Flash China Purchasing Managers' Index, the earliest indicator of the country's manufacturing activity slanted more to private and export-oriented firms, fell in July to 47.7, down from a final reading of 48.2 in June, HSBC Holdings PLC announced today.
A reading of 50 or higher generally indicates that activity is expanding.
The reading plunged for the fourth month in a row and was the lowest in 11 months, fueling concern about China's economic malaise.
"The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors due to weaker new orders and faster destocking," said Qu Hongbin,the chief economist for China at HSBC Holdings Plc.
The market decline also came amid a continuous rise in borrowing costs on the interbank market, with the seven-day repurchase rate, an indicator of liquidity strain among banks, advanced 5.2 basis points to 4.01 percent, the sixth consecutive gain.
The gauge surged to 11 percent in China's worst liquidity crisis in a decade last month, which gave a blow to stocks and sent the key Shanghai Composite Index down nearly 10 percent.
Lenders were the biggest dampener today amid concern over a glut of shares after China Merchants Bank, the country's sixth-largest lender by assets, said it has received approval from the China Securities Regulatory Commission to raise 35 billion yuan through a rights issue in Shanghai and Hong Kong.
China Merchants Bank fell 1.4 percent to 10.90 yuan. China Minsheng Banking Corp dropped 2 percent to 8.47 yuan. Industrial Bank Co decreased 2.6 percent to 9.39 yuan.
A wide sell-off in heavily weighted stocks dragged the market down, with the key Shanghai Composite Index ending 0.52 percent lower to settle at 2,033.33 points. Daily turnover was 93.7 billion yuan (US$15.4 billion).
The market pared a slump of as much as 1.6 percent in early trading thanks to a rebound in small-cap shares of media companies, environmental-protection firms and IT enterprises.
HSBC's Flash China Purchasing Managers' Index, the earliest indicator of the country's manufacturing activity slanted more to private and export-oriented firms, fell in July to 47.7, down from a final reading of 48.2 in June, HSBC Holdings PLC announced today.
A reading of 50 or higher generally indicates that activity is expanding.
The reading plunged for the fourth month in a row and was the lowest in 11 months, fueling concern about China's economic malaise.
"The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors due to weaker new orders and faster destocking," said Qu Hongbin,the chief economist for China at HSBC Holdings Plc.
The market decline also came amid a continuous rise in borrowing costs on the interbank market, with the seven-day repurchase rate, an indicator of liquidity strain among banks, advanced 5.2 basis points to 4.01 percent, the sixth consecutive gain.
The gauge surged to 11 percent in China's worst liquidity crisis in a decade last month, which gave a blow to stocks and sent the key Shanghai Composite Index down nearly 10 percent.
Lenders were the biggest dampener today amid concern over a glut of shares after China Merchants Bank, the country's sixth-largest lender by assets, said it has received approval from the China Securities Regulatory Commission to raise 35 billion yuan through a rights issue in Shanghai and Hong Kong.
China Merchants Bank fell 1.4 percent to 10.90 yuan. China Minsheng Banking Corp dropped 2 percent to 8.47 yuan. Industrial Bank Co decreased 2.6 percent to 9.39 yuan.
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