SHANGHAI: Following the dive in US stocks, the Shanghai stock market yesterday dropped 2.81 percent, the largest one-day decline in six weeks.
The benchmark Shanghai Composite Index slid 2.81 percent to close at 5290.61, with 608 out of 909 stocks closing lower. The Shenzhen Component Index dived 3.58 percent to close at 18351.99. Turnover on the two bourses dropped 6.8 percent to 247.4 billion yuan.
Shares of Yunnan Copper tumbled 6.92 percent and aluminum producer Shanxi GuanLu slid 6 percent.
In Hong Kong, the Hang Seng Index plunged 5.37 percent to close at 24450.85.
Analysts said Citigroup's announcement of the fourth-quarter loss of $9.83 billion has intensified worries of a worldwide economic slump, prompting investors in many markets to hastily unload their holdings.
"Institutional investors are worried a weakening US economy will adversely affect Chinese companies and the economy," said Zhu Haibin, an analyst at Essence Securities.
Many large-cap stocks on the mainland fell yesterday, led by banks and real estate developers, as a knee-jerk reaction to the drop in their H shares in Hong Kong.
China Aluminum plunged 5.6 percent to close at 40.61 yuan while its H shares dived 7.6 percent to close at HK$12.42. PetroChina fell 1.98 percent to close at 29.88 yuan and its H shares slid 6.14 percent to close at HK$11.92.
Industrial Bank fell 8.48 percent and Shanghai Pudong Development Bank tumbled 5.61 percent. The central bank issued large amounts of commercial papers at the beginning of this year to mop up excess liquidity in the banking system.
Shares of non-ferrous companies fell sharply, triggered by the weak performance of non-ferrous metals in the futures market, analysts said. Many non-ferrous metals contracts on the Shanghai Futures Exchange dropped to the daily allowable limits in yesterday's trading.
Real estate companies dived after Qi Ji, vice-minister of construction, was quoted as saying on Tuesday that the government will introduce more stringent measures against price fixing in the property market. Leading real estate developer Vanke A slid 5.52 percent to close at 28.58 yuan and Poly Real Estate plunged 7.44 percent.
Stocks in the agriculture and food sector performed well because of the strong performance of agricultural products in the international market, analysts said. Gansu Yasheng Industrial (Group) Co Ltd, an agricultural planting and processing company, jumped 6.67 percent after posting an over 250 percent increase in net profit last year.
"The gross profits of companies in the food and agricultural sector are expected to be better than companies in the electrical appliances sector," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
The Shanghai Securities News reported the price- earnings ratio of small and medium-sized companies was as high as 90, much higher than the average of 61.23 for A shares in Shanghai and 78.8 in Shenzhen.
"The high stock valuation is unsustainable," said Zhu of Essence Securities.
Source:China Daily
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