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CHINA / Chinadaily.com.cn Exclusive |
Panic selling drives stock indices down furtherBy Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-28 16:47 Panic spread in China's stock market on Wednesday as key indices continued to tumble due to major falls in blue chips. The Shanghai Composite Index, the most widely watched indicator of the mainland's equity market, fell below 4,800 points in afternoon trading. It recovered some lost ground in the last half hour to close at 4,803.39, a decrease of 1.19 percent from the previous session. Since reaching an all-time high of 6,124.04 on October 16, the gauge has lost 21.57 percent and is running below the 120-day moving average which is deemed as a turning point between a bull and bear market by those investors keen on technical analysis of the market. "It is too early to announce the end of the bull run," Professor Guo Tianyong of Central University of Finance and Economics told chinadaily.com.cn. Investors do not need to get overly pessimistic, he said, adding that they should not rely too heavily on technical analysis, which is based on past experience. The most important driver of the stock market is the growth in listed firms’ earnings, Guo explained. "Judging from the half-year and third-quarter reports by listed firms, their profitability is good." He called the fall in the market a normal correction, as the level of 6,000 points in the Shanghai Composite Index is relatively high for the time being. "But if the firms' earnings continue to grow, then 6,000 points are no longer unreasonable." Other indicators also witnessed major falls. The Shenzhen Composite Index dropped 1.57 percent to 1,219.98, while the CSI 300 index of major companies in the two bourses declined 1.32 percent to 4,648.75. Turnover in Shanghai and Shenzhen continue to shrink, to 77.39 billion yuan, compared with the more than 130 billion yuan daily average in September. The low volume showed investors preferred to shun shares for now, unless they saw a major sign of recovery. A lingering worry for investors is the possibility of further monetary tightening. The country's top priority next year will be to prevent the economy from overheating and curb inflation, according to a meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee on Tuesday. China's Gross Domestic Product (GDP) grew 11.5 percent in the first three quarters from a year earlier, and the Consumer Price Index (CPI), a barometer of inflation, rose 4.4 percent year-on-year in the first 10 months. Analysts expect the central bank to raise interest rates once more before the year-end. So far this year, the interest rates have been raised five times and the bank reserve ratio nine times. Blue chips remained leaders in the decline. Sinopec fell 4.02 percent to close at 20.07 yuan per share, followed by a 1.2 percent drop in PetroChina to 32.15 yuan. In the banking sector, Bank of China went down 3.83 percent to 6.28 yuan, while the Industrial and Commercial Bank of China declined 2.2 percent to 7.54 yuan. |
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