Chinese shares declined yesterday, with the key Shanghai index falling 2.28 percent, as bleak November economic data exacerbate fears of worsening profitability of companies.
The benchmark Shanghai Composite Index fell 47.44 points to 2,031.68 in active trade.
Declining stocks outnumbered advancing ones by 742 to 142. The smaller Shenzhen Component Index also fell 1.72 percent, or 128.8 points, to 7,361.49 points.
China's exports unexpectedly fell 2.2 percent in November, the first monthly drop in seven years.
Other key economic indices released subsequently this week, including producer price index (PPI) and consumer price index (CPI), were also below market expectations.
"The major economic data confirmed previous market forecast that the performance of industrial enterprises, in particular manufacturers, continued to edge down, signaling worse annual reports of listed companies," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
Mao Nan, an analyst with Orient Securities, said the exacerbating external environment brought by the sharp fall in raw material prices would lead to continued market volatility. "The index may pick up with a wide swing, but a broad advancement is unlikely till the fundamentals recover."
He said historically, the growth of stock market indices are related to companies' performance.
The central government's pledge to stabilize the capital market at the Central Economic Work Conference had limited momentum to lift share prices, as a statement had been expected prior to the meeting, said market sources.
"The tone for a 'stable and healthy development of the capital market' may increase investor confidence, but it cannot immediately trigger a recovery unless more concrete measures are forthcoming along with a global economic recovery," said Zhou Chunsheng, professor of finance, Cheung Kong School of Business.
Zhou, however, said that the hardest period is over for the market and hefty falls are unlikely in the future.
In yesterday's trading, shares of banks, reversed from their broad rally on Wednesday and fell sharply with all the 14 stocks ending in the red.
Industrial and Commercial Bank of China fell 2.70 percent to 3.97 yuan, while China Construction Bank shed 3.1 percent to close at 4.37 yuan.
But China Southern Airlines and smaller rival China Eastern Airlines bucked the downtrend and soared to their daily limits after they got capital injection of 3 billion yuan each from the government.
Oil and gas heavyweight Sinopec fell 3.32 percent to 8.16 yuan.
"The market turnaround depends largely on how the index heavyweights perform," Wu said.
Source: China Daily
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