In what analysts described as a crucial technical adjustment,
the benchmark Shanghai Composite Index yesterday tumbled 280.71
points, or 4.8 percent, the biggest one-day drop since July 5, to
close at 5562.39.
It was an across-the-board slide, with losing stocks
outnumbering the gainers by 802 to 44. Turnover on the Shanghai
bourse totaled 121 billion yuan, up 18 percent from the previous
day.
The plunge brought the indicator 9.17 percent below the record
high of 6124.04 the index touched on October 16.
The smaller Shenzhen Component Index yesterday fell 586.58
points, or 3.13 percent, to close at 18175.31.
Analysts said the latest stock price adjustment after the
massive run-up in the weeks before the index breached the 6000
level was triggered by a combination of factors, including
heightened concern about possible tightening measures and the
withdrawal of funds from the market by many small investors to
subscribe for the 37 billion yuan PetroChina initial public
offering.
Strong government measures to combat inflation and excessive
investment, including interest rate hikes and credit tightening,
could have an indirect impact on stock investment, analysts
said.
Figures released yesterday by the National Bureau of Statistics
showed China's gross domestic product for the first three quarters
totaled 16.6 trillion yuan, up 11.5 percent year-on-year. The
consumer price index in the same period rose 4.1 percent.
"Although concerns about rising inflation and excessive growth
have eased somewhat, the huge supply of liquidity in the financial
market is still seen to be exerting strong pressure on inflation
and investments," said Shen Minggao, a senior economist at
Citigroup in Beijing.
Jason Chang, an economist at Standard Chartered Bank in
Shanghai, said he expected further tightening measures in the
fourth quarter. "We expect at least one more interest rate hike
this year," Chang said.
"Many short-term investors have obviously decided to stay on the
sidelines after booking profit," said Zhao Xinge, a professor of
finance at the China Europe Industrial and Business School.
Wu Gang, an analyst at Orient Securities, said the huge public
offering by PetroChina is expected to siphon off a considerable
amount of money from the market.
"A chunk of investment funds has gone into the subscription of
PetroChina shares," Wu said. "Don't expect the market to stage any
significant rebound before the subscription process is over next
week."
(China Daily October 26, 2007)
