Key index declines on rate fears
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Shanghai's key stock index yesterday fell for an eighth day, the longest losing streak since December 2008, on fears interest rates will rise.
The Shanghai Composite Index shed 0.1 percent to end at 2,706.36.
The three-day Dragon Boat Festival holiday, which ends next Monday, may be a sensitive time as the Chinese central bank may announce an interest rate increase, said UBS Securities Co. It estimated China's Consumer Price Index to rise to 5.5 percent in May and then climb to 6 percent in June because recent droughts in central China may have inflated food prices.
Li Xunlei, chief economist at Guotai Junan Securities Co, also said June inflation may jump to 5.7 percent from a year earlier and lead to a possible interest rate hike.
Poly Real Estate Group Co, China's second-largest listed developer, dropped 3.3 percent to 9.51 yuan.
Sany Heavy Industry Co fell for a ninth day, leading declines for industrial companies, on speculation power shortages will cut production capacity. Sany shed 2.5 percent to 15.32 yuan, its lowest close since February 24.
But some analysts said the weak market may be an opportunity to buy low.
"The opportunity (for a rebound) is coming," said Mao Yu, chairman of 51value.com, a financial analysis website. "There is no room left to drop further given the fact that shares in the market now have price-to-earnings level close to their record low."
The weighted average P/E ratio of shares in the SSE 50 Index, a basket of the 50 largest stocks of good liquidity in the market, is now around 9.6 times, lower than the 12 times they were at when the key index plunged to 1,600 points, Mao said.
Dai Xianglong, president of the National Council for Social Security Fund which has over 740 billion yuan, said earlier that six asset management firms have invested 10 billion yuan from the fund in Chinese mainland's stocks.
"The last two occasions when he (Dai) decided to put more money from the national fund into stocks coincided with the market hitting the bottom," Mao noted.
