Stocks News
- Shares tumble 4.51% on tight money fears
Date: 12-Sep-2007 Sources: (Shenzhen Daily)
THE mainland's benchmark share index plunged 4.51 percent yesterday, its biggest daily drop in two months, on fears that the ample supplies of new money which fueled this year's bull run might tighten.
News that August's consumer price inflation jumped to 6.5 percent, the highest in nearly 11 years, prompted speculation that the central bank would hike interest rates as soon as this week and continue tightening policy in coming months.
Late Monday, the finance ministry announced plans to sell 200 billion yuan (US$27 billion) of special bonds directly to the money market by the end of this year, which may also tighten the supply of funds.
On the demand side, the market will face a record cash call starting Friday with subscriptions to the Shanghai initial public offering (IPO) of China Construction Bank.
The IPO is expected to raise as much as 56 billion yuan, dwarfing the previous record of 46.6 billion, and be followed by a series of big equity offers in the next few months.
Analysts said that after more than doubling this year to last Thursday's all-time high, the benchmark index might finally be starting a substantial pull-back, though they believe a full-fledged bear market remains very unlikely.
'All the government policies will have a cumulative impact on the market. Eventually, there will be a last straw on the camel's back,'said Liu Lifeng, fund manager at BOCI Securities.
The Shanghai Composite Index tumbled to close down 4.51 percent at 5,113.968 points. The Shenzhen Component Index fell 4.4 percent to 17,129.39.
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