China stocks slide 7.7 pct on monetary tightening
Written on June 11, 2008
China’s main stock index tumbled 7.73 percent on Tuesday, its biggest drop since June last year, after the central bank announced a harsher-than-expected tightening of monetary policy to fight inflation.
Banks and property shares led the declines as buyers fled the market, fearing more action by the central bank in coming months. Weakness in global equities markets, which are being hit hard by high oil prices, also dragged down Chinese stocks.
The Shanghai Composite Index .SSEC closed at 3,072.333 points, not far from the day’s low of 3,045.058, leaving it 50 percent below last October’s record peak. Tuesday’s slide in the Shanghai and Shenzhen markets erased about $240 billion of value.
Losing Shanghai stocks overwhelmed gainers by 891 to 20, while more than 530 shares plunged their 10 percent daily limits. Turnover in Shanghai A shares was very thin at 60.3 billion yuan ($8.7 billion).
“Nobody dares to buy in a market like this — confidence is gone,” said Chen Jinren, analyst at Huatai Securities, adding that the index had a good chance in coming days or weeks of testing its 13-month low of 2,990 points, hit on April 22.
The government intervened to support the market in April by cutting the stock trading tax, and many investors see a good chance of another rescue attempt — perhaps the long-delayed introduction of margin trade and securities lending, which would benefit brokerages and could draw some buyers back to the market.
But many analysts think high inflation, the prospect of more monetary tightening and poor supply/demand conditions for shares could continue to weigh on the market for months low rates payday advance. “Official steps to help the market may not work,” said Chen.
GLOBAL CYCLE