The mainland stock market dropped 0.78 percent after statistics released yesterday indicated fixed-asset investment growth rebounded, sparking fears that tightening measures would continue.
The benchmark Shanghai Composite Index opened 1.56 percent higher in the morning, triggered by the surge of US stocks on Wednesday. But sales appeared after macro data was announced, which led the index to close at 2684.78, down 21.09 points from Wednesday. Losers outnumbered gainers by 586 to 276.
The Shenzhen Component Index shed 0.38 percent, or 35.01 points to close at 9288.37. The turnover on the two bourses amounted to 81.9 billion yuan, down 14.5 percent from Wednesday.
Analysts said that China's economic growth moderation and corporate profit squeeze were expected to put further pressure on stock investors' sentiment.
"The rebound in fixed-asset investment growth suggests that the government and the central bank may not be able to relax their tightening policies anytime soon, as strong investment growth will exacerbate upstream inflation pressure and the CPI outlook is still uncertain," said Sun Mingchun, an economist at Lehman Brothers.
Jing Ulrich, chairman of JPMorgan Securities China Equities, said: "The continued robust economic growth means that a tighter monetary policy stance remains a viable option if upstream inflationary pressures escalate."
In addition, the deteriorating corporate earnings growth also undermined investors' fragile confidence in the stability of the mainland stock market.
The National Bureau of Statistics said in a statement on its website that the pressure brought about by surging prices was still prominent and it sparked investors' concerns that further tightening policies, which would squeeze corporate earnings, could follow.
"The government will likely maintain their tightening bias for at least two to three months, but will not be more aggressive," said Sun.
Huang Yiping, an economist at Citi China, said: "The tightening of monetary policies should continue in order to control the inflation risk. But the pace of tightening, such as adjustment in reserve requirement and appreciation of the currency, could slow."
Financial and real estate stocks plummeted while medicine and beverage companies rose in yesterday's trading.
Haitong Securities tumbled 3.28 percent to close at 21.56 yuan and Bank of Ningbo plunged 7.43 percent. Real estate developer Beijing North Star Co Ltd sunk 9.85 percent to 7.05 yuan and Shanghai Industrial Development Co Ltd slid 3.72 percent.
Source: China Daily
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