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Stocks plunge on worries over financial crisis, economy
By Dong Zhixin (chinadaily.com.cn)
Updated: 2008-10-13 15:49 Chinese stocks fell sharply on Monday, as fears over the fallout from the global financial crisis overwhelmed the positive effects of a pair of new measures announced to boost the market.
The benchmark Shanghai Composite Index dropped 5.23 percent from the pervious session to close at 2,173.53 points, after the National Day holiday break last week.
In a vivid illustration of China's increasing integration into the world, the Shanghai market opened more than one percent lower on Monday morning before going on a steady decline to close at an intra-day low. Concerns are growing that the financial crisis and global recession may put a brake on China's growth, as exports account for more than one third of the country's gross domestic product. UBS has lowered its forecast for China's growth in 2009 to 8.0 percent from 8.8 percent, citing a much weaker global growth outlook and forecasts of a deeper and longer US recession. The carnage was especially extraordinary, considering that the China Securities Regulatory Commission (CSRC) and the People's Bank of China announced a pair of measures on Sunday to prop up the market. China will soon allow margin trading and short selling of securities on a trial basis, the CSRC said. The long-awaited move is expected to increase cash available for investment, and make trading more active. In margin trading, investors borrow money from brokerages to buy shares, while short selling refers to a situation in which investors borrow shares to sell them on the market. Shares of brokerage firms jumped, on hope that the new measure may expand their revenue sources. Haitong Securities led the rally, jumping its daily limit of 10 percent. In another energizing move, the Chinese central bank said that companies can resume the sale of medium-term notes in the nation's interbank bond market and that listed companies can use the proceeds to buy back shares. However, the two measures failed to lift the overall investor morale hammered by Wall Street woes and economic worries. Banking shares were among the biggest losers, with five lenders falling 10 percent, the maximum allowed by the exchange. The country's biggest bank, the Industrial and Commercial Bank of China, shed 6.44 percent to close at 4.07 yuan per share. Oil and mineral shares also fell sharply, as investors expect demand to fall amid an economic slowdown. PetroChina lost 5.06 percent to 12.19 yuan. Bucking the trend, agricultural shares jumped, as investors hoped for more preferential policies in the sector at the upcoming Party meeting. Heilongjiang Agriculture Co Ltd rose 10 percent. |
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