Stocks News
- Shares end down on bank reserve hike
Date: 13-Nov-2007 Sources: (Shenzhen Daily)
THE mainland stock market closed down 2.4 percent yesterday as the government's latest monetary tightening sparked a selling spree in large caps such as banking stocks, but the key index ended well above its intra-day low.
The benchmark Shanghai Composite Index ended at 5,187.735 points, its lowest close in two months, after tumbling as much as 5.3 percent to an intra-day low of 5,032.578 early in the afternoon. The Shenzhen Composite Index fell 1.5 percent to 1,280.73.
'Market fundamentals don't support such a plunge,'said Zheng Weigang, senior stock analyst at Shanghai Securities, pointing to China's robust economic growth and strong corporate earnings.
'But investor sentiment has anyway been battered by the recent steep falls,'Zheng said. 'So the index is likely to move mainly between 5,000 and 5,300 in the coming weeks if there is no fresh market-moving news.'
Yesterday's fall came after the central bank announced at the weekend a bank reserve hike due to take effect Nov. 26, and in the wake of an 8 percent dive last week, the index's biggest weekly drop this decade.
Losing Shanghai stocks outnumbered gainers by 546 to 286, with Industrial & Commercial Bank of China, the index's largest capitalized stock, closing down 2.16 percent at 8.17 yuan.
PetroChina, the country's biggest oil producer which will be included in the index next week and take over as the top heavyweight, tumbled 4.53 percent to 36.45 yuan.
Both were among the 10 most actively traded shares.
Turnover in Shanghai A shares was modest at 86.2 billion yuan (US$12 billion), compared with Friday's 79.9 billion, indicating that many investors were staying on the sidelines and still reluctant to sell despite the weak market, analysts said.
'With the economy and corporate earnings still on the right track, there is no reason for investors to be panic,'said analyst Wu Haijun at Power Pacific Corp. of Canada.
'The market does have problems including high valuations, but its recent correction has washed out much profit-taking pressure and investment opportunities are appearing in many stocks.'
The index is 15 percent below its all-time high of 6,124 points hit in mid-October.
Its rebound in late trade, after nearing its recent low of 5,025 hit Sept. 12, was a sign that the index was unlikely to cleanly breach the psychologically important 5,000 level any time soon, analysts said.
Analysts see the latest downturn mostly as a creation of the government, which wants to cool the market. Regulators halted approvals of new mutual funds, encouraged a flood of stock offers and cracked down on illegal money flows into shares.
But with the index approaching the crucial 5,000 mark, many analysts believe the government may move to reassure investors, allowing legal inflows such as through mutual funds while slowing new share issues.
Market watchers were also hoping that the China Securities Regulatory Commission would resume the approval of new funds to invest in stocks in coming weeks.
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