SHANGHAI: The total market value of mainland stocks shrank 1.59 trillion yuan yesterday as the Shanghai market plummeted nearly 5 percent, the largest one-day fall in four months.
The benchmark Shanghai Composite Index dived 4.85 percent to close at 5330.02, with 765 out of 907 stocks closing lower. The Shenzhen Component Index slid 4.21 percent to 17465.46. The turnover on two bourses amounted to 125.13 billion yuan.
Analysts attributed yesterday's drop to a knee-jerk reaction to the plunge of US stocks the day before, which also triggered a run on all other Asian stock markets.
Hong Kong's Hang Seng Index fell 3.19 percent to close at 28760.22 yesterday while Japan's Nikkei Index dropped 2.02 percent to 15771.57.
The high price-earnings ratio of stocks and the slowdown in the flow of new capital into the market are also seen by analysts as two other major factors taking the steam out of the market. They point out that no new fund has come to the market in nearly two months.
Recent talks about stock market risks by senior economists have also intensified worries about further government measures, they said.
Economist Xu Xiaonian said recently at a forum that China's stock market bubble is graver than that of Japan before the slump there.
"Many stocks have been overpriced, such as the ones in steel and non-ferrous sectors," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
Huafu Fund statistics show the average price-earnings ratio was 39.93 times yesterday, rising from 29.86 times at the end of last year.
"Many mutual funds have begun to decrease their stock holdings after the government released a strong warning earlier this week against overexpansion," said Zhu Haibin, an analyst at Essence Securities.
"Many individual investors are hesitant to enter the market at this point because they are not sure where it is heading," said Zhang Fan, an analyst at Changjiang Securities.
Source:China Daily
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