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Stocks slide to lowest in 19 months

By Wang Lan (China Daily)
Updated: 2008-08-12 07:07

Led by a plunge in metal and energy stocks, the benchmark index of the Chinese stock market Monday lost more than 5 percent to fall to its lowest level in 19 months amid growing concern about a slowing economy.

Massive unloading of Olympics-related stocks, such as tourism and catering, also weighed down the key indicator.

A man at a securities house in Huaibei, Anhui province August 11, 2008. The Shanghai Composite Index plunged 5.21 percent to reach a 10-month low. [Asianewsphoto]

The benchmark Shanghai Composite Index slid 5.21 percent to 2470.07 points, with the turnover amounting to 41.5 billion yuan, down 10 percent from the previous trading day.

The smaller Shenzhen Component Index also sank 5.64 percent to close at 8170.15 points.

Together with the decline of 4.47 percent last Friday, the index plunged a total of almost 10 percent in two trading days.

Economists and stock analysts said the latest plunge was a continuation of the depressed sentiment that has clouded the market in the past 10 months or so.

Although inflation pressure seemed to have eased, investor confidence took a greater blow from heightened worries about a global recession and a slowdown in the domestic economy.

The unexpectedly fast increase in rising producer price index, or PPI, published Monday has also raised concerns about increased pressure on the profits of many manufacturers.

Figures from the National Bureau of Statistics showed PPI registered a sharp increase of 10 percent year-on-year, compared with 8.8 percent in June.

The spike in July PPI came on the back of the price increase in domestic oil products and other commodity prices, including coal and metals.

“Higher-than-expected producer price inflation for July may have further dented investor confidence and pushed the Shanghai Composite Index below the 2500 threshold,” said Jing Ulrich, chairman of China Equities at JPMorgan Securities.

This sentiment was reflected in the heavy beating taken by the metal and energy counters.

Shares of PetroChina, one of the largest constituent shares of the index, slid 5.54 percent to 13.8 yuan. Handan Iron and Steel Co dropped 4.21 percent to 3.87 yuan while China Aluminum, or Chalco, China’s largest aluminum producer, plummeted 10 percent to 10.38 yuan.

Shandong Nanshan Aluminum Co sank 9.76 percent to 8.14 yuan while Jiangxi Copper dropped 9.98 percent to 17.32 yuan.

Some analysts attributed the plunge to investors’ dumping of Olympics-related stocks. Many stocks considered related with the Games saw a big plunge in the past two days of trading since the Games opened as investors worry they have been overvalued.

China Quanjude (Group) Co, which operates a chain of Peking duck restaurants, tumbled by the 10 percent daily limit to 43.36 yuan, while Beijing Yanjing Brewery continued its sharp plunge from last Friday and fell 10 percent to 12.92 yuan.

“Before the Games opened, many investors had pinned high expectations on it, which they thought would help lift market sentiments and lead to a significant rebound,” said Mao Nan, an analyst at Orient Securities in Shanghai. “

When the Games began, they started to unload the Olympics-related stocks, which weighed down the market.”